What credit score do you start with?

If you’re hoping to open any new credit accounts, take out a loan or even, in some cases, rent an apartment, knowing your credit score is important.

But if you don’t have any open credit, it can be difficult to know where you stand. You might think you start at the bottom and work your way up, but that’s not exactly how it works.

Both FICO and VantageScore scores range from 300 to 850. But no one starts at 300. If you don’t have anything for credit bureaus to track, you might be considered credit invisible – meaning you don’t have a score at all. People who fall in this category are generally brand new to credit because they’re young or new to this country. It can also mean people who haven’t used credit for more than 10 years.  Scoring algorithms need recent activity to base a score on. If that doesn’t exist, you’ll need to start afresh.

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If you’re currently credit invisible, it doesn’t take long to get a credit score – perhaps even a very good score. FICO can generate a score six months after at least one credit account is reported. VantageScore is able to do so almost as soon as the account is opened.

See related: What is a thin credit profile and how can you build it up?

Can I have a 300 credit score?

Even though you don’t start at 300, you can have a credit score that low if you don’t practice smart credit habits. People with multiple collection accounts, repossessions and bankruptcies on their credit reports could find themselves in this range.

Best cards for young adults

Pay your bills on time, every single time. Payment history is the No. 1 factor in the FICO model, making up a whopping 35% of your score. Paying your bills on time – and in full – also impacts your credit utilization, or how much of your available credit you have used at any given time. This is also very important as it counts for 30% of your FICO score. Know what your credit limit is and try to stay under 30% of that limit. The closer you can get to single digits in this category, the better it will be for your score.

Carefully consider your borrowing choices. Credit mix, or the types of accounts you have, makes up 10% of your FICO score and is an area that is often overlooked when it comes to beefing up your credit score. Once you have a credit card, you might consider a passbook loan or even an auto loan to help in this area. Just remember that new credit also counts for 10% of your score, so you don’t want to open a bunch of new accounts all at once.

Fifteen percent of your FICO score comes from your credit history, or how old your accounts are. This is the one area over which you have little control if you are just starting out. Your accounts can only be as old as they are. But this is a good reminder to not close any credit accounts unless you have a really good reason – especially if it’s your oldest account.

Bottom line

I don’t recommend chasing scores, but 700 is not a bad goal to aim for. There are some newer products out there that could help you reach your goal a bit sooner, with the added advantage of not forcing you to take on new debt.

Experian Boost taps into your checking account to report good payment history on things like your cell phone and other utility bills. UltraFICO, currently in its pilot phase, is another product that utilizes your banking information to highlight your money management skills and help your score. These products will only affect your score with Experian, but for those new to credit it could prove the “boost” you need.

Remember to keep track of your score!

Source: creditcards.com