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What Does Your Credit Score Start At?

Certified Mortgage Advisor
NMLS 1701021
September 24, 2019

Unraveling the mystery of your credit score

We're going to talk about what does your credit score start at? So the problem is that credit is so much of a mystery in our lives, right? Credit can run a large portion of the bigger decisions that we make in life. What car can we buy? What mortgage can we get? Can we buy a home or not? Can we apply it to rent somewhere? It can affect so many different things and can cost us a lot of money if we don't know how to use it well.

We're going to talk about what your credit score starts at along with how to make sure that if you're new at building the credit you're going to keep your score high and build that as quickly as possible and maintain that for a long period of time. So you can save money on things like interest rates insurance, and just the opportunity that you get with a higher credit score.

Then we're also going to talk about if you already have an established credit score and a couple of tips that you can keep in mind to make sure that your credit is looking as new and as clean as possible.

How credit report exist

Maybe contrary to what a lot of people might think you don't have a magic number that you start with. There's no one credit score number that you start with when you turn 18 when you're first eligible for credit. What ends up happening is you don't get a credit score unless you use credit.

So if you've never opened any sort of credit in your life, your credit score isn't even going to exist. There's no such thing as a zero credit score. It just doesn't exist yet because no credit companies are reporting yet on your credit report.

Listen up 18 year old kids!

So what would happen is when you're 18 that's when you first become eligible to apply for credit or have credit extended to you. So depending on what type of credit line you open will determine what your credit score is going to be. So really it could be anywhere on a spectrum, but for most people, it's usually going to be in the mid 600 range to the mid 700 range when you're first starting out.

So let's say someone was 18 and then they just got a student loan. They're probably going to be sitting around a 650 to a 750 credit score starting out, which is awesome. The thing that's holding them back from having a super high score is just a low usage of credit.

What is a credit score?

A credit score is not an indicator of your financial wellbeing or your financial health. Credit score is only an indication of how well you pay back debt. That's all that number says. So for instance, you can be new at having credit, and have a pretty decent credit score but it's gonna take you a little bit of time to continue building up that credit score.

Get a credit card

So a couple of things you can do, let's say you're new at credit. Some things that you can do to start building a credit score from scratch. Number one is you can apply for a secured credit card. A secured credit card is basically where you're going to put money down and you're going to have a limit for that amount. So let's say I gave my credit union $200. They're going to give me a credit card for $200. So that max limit is 200 and then what I can do is I can go and make purchases on that.

A good practice is use your credit card and paid off regularly

For instance, you could have one card set aside and say, this is my gas card. What I do is I go and I pay for gas with that. Then every single month I pay that off. That's exactly what I do with my credit card I go and make purchases just using my credit card because I like the security of it. But then two, I want it to continue building credit. And then what I do is I pay it off every month. I just budgeted in and make sure that I'm never overspending in the certain categories that I have predefined for me.

Always ask this to yourself: Am I you using my credit well?

But credit again is all about how well you use credit. So if you have that in mind, that understanding that building credit is all about how well you use credit, then you're going to understand the rules of the credit game without even actually knowing all of the ins and outs and some of the technical details of what that looks like.

Because every time you make a credit decision think, is this me using credit well? So number one starting with a secured credit card is going to be a great way to add that credit line to your credit report. Also, if you have, you're eventually probably going to start looking at the possibility of an auto loan or an auto lease, maybe student loans, those are great to have on your credit report too.

No delinquent payments, please?

What you want to make sure with those is absolutely make on-time payments. Don't get credit that you're not going to be able to afford monthly. Because a late payment is a huge hit to your credit score. It is an incredible hit your credit score. It's going to stay on there for a long period of time.

Auto payments can save you

So when you get credit, make sure that you're enrolled in auto payments. You have money set aside, always ready to make those payments because a late payment will cost you so much money and opportunity in the future because of a low credit score.

Don't bite more than you can chew

So really when you're building credit, it all comes down to the idea of am I using credit well? So make sure that you're not taking out a ton of credit that you can't afford over a short period of time. Really good utilization of credit is to say, this is money that I'm taking out now, but I have a plan to pay it back and I have a plan to pay it back in X amount of months.

That is a good plan for credit. Credit is not something that you're going to keep and carry for a long period of time. Like a lot of people do. That's how your credit score is going to continue to lower because you're using too much credit over a period of time.

Age does matter

Also, something to keep in mind with new credit is that your credit score is going to eventually start at one spot when you get your first credit account open. Then the longer period of time, or longer period of time that you're using credit, this is called the average age of accounts, the higher your score is going to be. That's because the age of all of your credit accounts is averaged and that age contributes to your credit score.

So somebody who has a younger credit is going to have a lower credit score than somebody who has older credit. For instance, credit scores in the 800s. I usually only see people with credit scores in the 800s if they are 40 and above. And a lot of that is due to people younger don't have as much time for that credit to age. And so it just takes some time to get to some of those higher scores.

Yes, it start to nothing

So hope that clears up a little bit more of what is your credit score start at. Really starts at zero for lack of a better word. It starts at nothing. There is no credit score until you open some credit. And as you get a history and a track record, then your credit score starts maturing and fluctuates less because you have a clear picture of how well you use credit. So use credit.

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Kyle Andrew Seagraves is Federal Mortgage Loan Originator (NMLS 1701021) licensed in all 50 states with the Dan Frio Team at Allied First Bank (NMLS 203463), an Equal Housing Lender. Separately, Kyle owns Win The House You Love LLC, an education company. Win The House You Love LLC is not a lender, does not issue loan qualifications, and does not extend credit of any kind. This website is only for educational usage. All calculations should be verified independently. This website is not an offer to lend and should not directly be used to make decisions on home offers, purchasing decisions, nor loan selections. Not guaranteed to provide accurate results, imply lending terms, qualification amounts, nor real estate advice. Seek counsel from a licensed real estate agent, loan originator, financial planner, accountant, and/or attorney for real estate, legal, and/or financial advice.

Allied First Bank is not affiliated with the VA, FHA or any other government agency. This site has not been approved by any government agency.
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