One of the most frustrating things about a credit score can be establishing it. When you don’t have a history of credit, it’s hard to get lenders to lend. They don’t know how you’re going to manage credit because you have no history, and that increases their risk. But don’t worry, if you’ve never had credit and don’t have a credit score, that doesn’t mean your credit score is zero.
Why You Don’t Have a Credit Score
No matter how badly you may have managed credit in the past, it’s impossible to have a credit score of zero. The most used credit scores, FICO and VantageScore, range from 300 to 850. Only one percent of consumers have a FICO score below 470. Scores below 300 are extremely rare. The reasons you don’t have a credit score can include:
- You’ve never been listed on a credit account
- You have not used credit in the past six months
- You only recently applied for credit or were added to an account
Where Does Your Credit Score Start?
When you first get established with a credit score, it doesn’t start at zero or in the bad zone of 300-629. Your credit score is based on how you manage the credit you’ve been given. When you don’t have a credit history, the credit bureaus can’t guess whether you’ll pay back what you’ve borrowed. A credit score is really an estimate of the likelihood you’ll pay back the next line of credit you’re granted, based on the data in your credit reports. Once you start using credit, your score can be calculated. It won’t likely start somewhere in the fair to good zone and move based on how your credit.
How to Get Credit When You Have No Credit History
The easiest way to start establishing credit is with a secured credit card or credit-builder loan. A secured credit card is secured with cash. The deposit is usually the credit limit. The credit-builder loan is similar. Once you’re approved for your first line of credit, you can quickly build your score by following some basic rules:
- Pay on time, every time – payment history influences your credit scores the most.
- Use your credit with restraint – keep your balances at less than 30% of your limit.
- Get a mix of account types – credit cards, installment loans, and auto loans would be an example to prove you can manage a variety of different types of credit lines.
Your Credit Score Numbers
Don’t get too worried about the numbers. When requested, your credit score is calculated reflecting your latest activity, whether it’s been 10 minutes or 10 months since the last inquiry. If your score is lower than you’d like today, just keep doing what you’re supposed to do, and it will get better. Each lender sets its own parameters for scores, but generally, the range for credit scores looks like the following:
- 300-629: Bad
- 630-689: Fair
- 690-719: Good
- 720- and up: Excellent
Need Help Establishing or Repairing Your Credit?
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