Many people understand how important a credit score is to financial well-being. While borrowers with good or excellent credit will get better deals, those who have previously missed payments will be forced to face extremely high interest rates. However, what if you have never applied for a loan before? What is your credit score? What credit score do you start with?
If this is your first time checking your credit score, you will most likely be surprised because you will see a three-digit number even if you have never applied for a loan. Many people don’t know, but a credit score doesn’t start from scratch. In fact, the minimum credit score you can have is 300 and the maximum is 850. Keep reading to find out where your credit score starts and how it’s calculated.
What Credit Score Do You Start With?
In fact, there is no single standard credit score that everyone starts with, as each person has a different credit history. However, it is important to note that credit history doesn’t start from scratch. But where does it begin then?
If you have never applied for loans or credit cards, you simply will not have any credit scores. This is because your credit score is not calculated until a lender or any other person requests it in order to determine your creditworthiness. So you don’t have to worry about your credit score starting from zero or getting too bad when you take out your first loan. However, you should understand that it is very important to use your responsibly in order to get the best possible credit score.
At What Age Does My Credit Score Start?
Many people who have never applied for loans and credit cards want to know at what age their credit score begins to form. It is important to note that most people do not have a credit report or credit score until they are 18 years old. This is because most often a borrower must be at least 18 years of age or older to be able to open a credit account or apply for a loan in their own name. Thus, it can be said that your credit score begins to form when you first apply for a loan on USNETLOAN or credit card.
So, when you qualify to borrow on your own, you will be able to monitor your credit score. If you make regular monthly payments, it will improve. However, you should also keep in mind that a late or missed payment can significantly improve your credit.
How Is Your Credit Calculated At The Beginning?
So, after you open a line of credit for the first time, there will be a few things that will affect your credit score. Below you can explore the main ones:
- Payment history. The payment history shows how well and on time you paid your payments. Thus, a late or missed payment will negatively affect your credit and your credit score will deteriorate.
- Credit utilization. Another important factor to look at is the credit utilization ratio, as it reflects how much of your available credit you use compared to how much you have. Typically, the credit utilization ratio is expressed as a percentage.
- Debt. You should also pay attention to the fact that having current outstanding debts on all your accounts will also decide how good your credit score will be. Thus, the more debts you have and the more they are overdue, the worse it is for your credit.
- Credit mix. For a good credit score, you need to have different types of credit. This is necessary so that creditors can make sure that you can easily cope with the payment of any of them. So this would include how much and what kind of loans you have, such as Payday Loans, Installment Loans, revolving credit accounts, credit cards, and so on.
Credit age will also have some effect on your credit score. Credit age shows how long your accounts have been open, and the longer they are open the better for you. New loan applications can also significantly affect your credit score. Thus, it is not recommended to apply for a large number of different types of loans in a short period of time, as this can significantly reduce your credit score.
How Can I Build a Good Credit Score?
Building a good credit history is a process that takes some time and effort, but it is not as difficult as it sounds.
One of the easiest ways is to apply for a credit-building loan. Many lenders and credit unions offer small loans to borrowers that can help them build their credit history from the ground up. It works like this: the lender deposits the loan amount into a blocked savings account, and the borrower needs to make small, timely payments over a fixed period of time in order to repay it. The lender will then report the payments to the credit bureaus, which will help the borrower get a good credit score.
Another option that borrowers without credit can consider is to apply for a secured credit card. However, in order to open such a card, you will need to make a deposit to the credit card issuer in order to be able to open it.
Remember that when building a credit history, it is important to pay off debts with interest on time in order for your credit score to be good. However, in case of late payments, you will worsen your credit and will be forced to apply only for unfavorable loan offers.
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