One of the biggest goals and purchases you might make in your life is buying your first house. You grab a cup of coffee and sit at your desk, browsing through real estate listings online. The excitement of owning your own home fills you with anticipation, but you know that securing a mortgage is a crucial step in the process.
You recently started using a new credit card to build your credit, but you’re unsure what your credit score might be. As you scroll through potential homes, you wonder, “What credit score do I actually start with?” With the thought of applying for a mortgage on your mind, you decide it’s time to understand more about your credit score. After all, it’s a key factor in getting a loan with favorable terms.
If you’re wondering what credit score you start with, this guide will provide the answers you need. We’ll explain the initial steps to building a good credit score, and by the end, you’ll be well-prepared to navigate your financial journey and move closer to owning your dream home.
What Credit Score Do You Start With
If you haven’t yet begun using credit, you won’t have a credit score. This is because the credit bureaus lack the necessary information to generate one for you. However, having no credit score isn’t the same as having a bad credit score. It simply means you haven’t established credit yet.
To receive a FICO credit score, you need to meet specific criteria that includes:
- At least one credit account that has been open for a minimum of six months.
- At least one credit account that has been reported to one of the three major credit bureaus within the last six months.
So, if you open your first credit card today, you shouldn’t expect to see a credit score immediately. In fact, you might have to wait for around three to six months of account activity before data can be used to generate your FICO score. By then, you can expect your score to fall within the range of 300 to 850, with 300 being the lowest and 850 the highest.
While having no credit score isn’t ideal, it does have some advantages. For one, it means you have no negative credit history, providing a clean slate to build good credit from the ground up. Additionally, starting fresh offers the potential to establish a strong credit score, which is often easier than repairing a poor one.
How To Build A Good Credit Score
As you wait for your initial credit score to appear, it’s wise to adopt strategies to build a strong credit profile. Aim for a score within the 670 to 739 range, which is considered a good starting point. A good credit score not only improves your chances of obtaining loans but also helps you secure more favorable terms and interest rates.
Reaching a score of 700 or higher can take anywhere from a few months to a few years, depending on how you manage your credit. Building and maintaining a good credit score requires understanding how it’s calculated. Your FICO score is based on five key factors, and here’s how you can improve each one:
- Pay bills on time: Payment history accounts for 35% of your credit score, making it the most significant factor. Even making minimum payments on time can positively impact your score. An app like Cushion can help stay on top of your bill and subscription due dates, preventing late or missed payments.
- Maintain your credit utilization below 30%: Credit utilization, which makes up 30% of your score, is the ratio of your credit card balances to your credit limits. Keeping this ratio below 30% shows lenders you’re using your credit responsibly.
- Keep old accounts open: The length of your credit history contributes 15% to your score. If you’re just starting using credit, you might not have a credit history Keeping old accounts open, even with minimal use, can increase your average account age and strengthen your credit profile as you build a longer credit history.
- Diversify your credit mix: A diverse range of credit accounts (such as credit cards, auto loans, and mortgages) makes up 10% of your score. Having different types of credit can strengthen your credit profile.
- Space out credit applications: Too many new credit requests can negatively affect your score, accounting for 10% of it. It’s advisable to wait at least 90 days at least 90 days between applications.
By focusing on these factors, you can effectively build and maintain a strong credit score. To help you on this journey, consider using Cushion. It reports your bill payments to credit bureaus, helping you build your credit profile effortlessly. With this app, you can organize your bills, use a virtual card for payments, and see your credit score improve over time.
Summary
Technically, if you haven’t started using credit yet, you won’t have a credit score. However, this isn’t a setback but an opportunity to build a solid credit foundation. By meeting FICO’s criteria and using strategies like timely bill payments and maintaining low credit utilization, you can establish a good score. Tools like Cushion can assist you by reporting your bill payments to credit bureaus, helping you efficiently build credit history and improve your chances of securing loans with favorable terms.
