A common misconception is that consumers start at the bottom of the credit ladder and move their way up. There can be an element of truth to this, but often it’s more nuanced than that. Most credit scores range from 300 to 850, so there’s no real zero. But some people don’t have any score, and anything under 580 is often considered poor credit. There is no one starting credit score that people must climb their way up from. Scores can be all over the map, due to a multitude of reasons, many of which we’ll break down here.

1. What is a Credit Score?

2. Five Categories for Your Credit Score

3. What Goes Into Your Starting Credit Score?

4. Unscorable vs. Invisible

5. How to Build Credit

6. How to Keep Stellar Credit

7. Protect Credit Against Fraud

1. What is a Credit Score?

A credit score is a three-digit number summarizing your credit risk, based on your credit data. A credit score helps lenders evaluate your credit profile and influences the credit that’s available to you, including loan and credit card approvals, interest rates, credit limits and more.

There’s no such thing as a credit score of zero. Most in the U.S. start at 300, and sometimes lower, depending on the scoring system — so you can’t have a credit score of zero. Some credit scores, such as Bankcard and Auto scores, can range from 250-900.

Before your information appears in a credit bureau file, your credit history simply doesn’t exist yet. Once you start to get approved for credit products such as credit cards and loans, you begin to build a credit history.

Until you meet a minimum criteria, you just won’t have a score, and the credit bureaus will communicate this to lenders.

2. Five Categories for Your Credit Score

FICO® Scores are used by 90 percent of top lenders in the U.S. and are the credit scores to know. While the exact FICO® Score formula is proprietary, FICO breaks down the general categories and weight additionally, according to FICO, these percentages refer to the general population, but for some groups, such as consumers who have not been using credit long, the relative importance of the categories may be different.

  • Payment History: 35%. Payment history is the historical record of whether you’ve paid your credit accounts on time. This includes records from credit cards, retail accounts and loans, plus public records such as bankruptcies, lawsuits and liens. For each late payment, the scoring formula takes into account how late the payment was, how much was owed and how recent the delinquency was.
  • Amounts Owed: 30%. This is the amount of money you owe lenders. This includes your outstanding balances, and also how that compares to the total amount of credit you’ve been extended, which is called your credit utilization ratio.
  • Length of Credit History: 15%. The longer your record of repaying loans is, the more you are seen as creditworthy. The FICO® Score looks at the age of your oldest account, as well as the average age of all your accounts.
  • New Credit: 10%. This piece of a FICO® Score refers to the number of new credit accounts you’ve applied for or opened. This is relevant since those who apply for many new loans in a short period of time could be seen as posing a greater repayment risk to lenders.
  • Credit Mix: 10%. The different types of credit accounts you have matter, from credit cards to a home mortgage. This factor may be more important for people who have a limited credit history.

3. What Goes Into Your Starting Credit Score?

When you are new to credit, your information available at the credit bureaus may be enough to calculate your score from the above mix of credit behavior, but it may be thin. What you need is a longer credit history.

One way to help your credit score is to make on-time payments. Another is to diversify the types of credit you have over time. For example, if you have one credit card, getting another or getting a different type of credit service, such as an installment loan, shows that you are capable of handling credit options responsibly.

Be careful, though — getting too much credit too soon can be a sign to potential lenders that you’re high risk.

4. Unscorable Versus Invisible

If you never use credit or loans, you may not have a credit score. You’re what’s referred to as “unscorable” — a term that means you may have a credit file, but the credit bureaus don’t have enough information on your credit history to calculate your credit score.

If you don’t have any credit history, you might be credit invisible, which means that none of the three major credit bureaus — TransUnion, Experian and Equifax — has a credit history on you. That can be because you have never obtained any credit or loan products using your name, you pay for everything in cash, you don’t have a credit card or you don’t have access to credit. An estimated 26 million — 1 out of 10 — Americans are known as “credit invisible.”

When you are credit invisible, the result could effectively be the same as having a poor score: You might be denied.

5. How to Build Credit

There are many ways to keep track of your credit score. First, start by checking your score regularly. If you have a credit card, you might check with your issuer. Discover, for example, offers free credit information to cardholders. You can also ask for a full credit report annually from the three major credit bureaus.

You could apply for a no-fee credit card. If you don’t qualify for a card on your own, consider a secured credit card or becoming an authorized user.

Once you have a credit card, it can help your credit score to pay in full and on time. According to creditcards.com, your payment history accounts for 35 percent of your credit score.

Also, consider your credit utilization ratio. Lenders want to see that you are not using too much of your available credit. The less you can use your credit (while still using your credit), the better.

6. How to Stay on Top of Your Credit Score

First, monitor your credit regularly for unexpected changes. Some banks and credit card providers show your FICO® Credit Score on your statement for free. Federal law requires each of the three nationwide credit bureaus (Equifax, Experian and TransUnion) to provide one free credit report per year. Visit annualcreditreport.com to receive this free report. The three bureaus currently offer the online reports weekly through April 2021.

Second, set up automatic payments, through online bill pay, to help ensure all your bills are paid on time. Every missed or late payment can have an impact on your credit. Setting up automatic payments helps eliminate human error from the bill payment process while saving time and avoiding late fees.

Manage how much of your credit line you use. Using too much of your available credit can hurt your credit score. Consider making additional payments to reduce how much of your credit line you’ve used.

Use credit smartly. Don’t max out your credit cards, and don’t apply for credit you don’t need. Some credit card and revolving loan offers seem too good to pass up, like no interest for years. But when you apply for new credit, a potential new creditor checks your credit history, and too many of these inquiries may pull down your score. And don’t rack up a lot of little balances. Use one card rather than carrying a lot of little balances on multiple cards.

Balance transfers, where you pay no interest on balance moved to a new account, can help you pay down debt faster, but constantly opening new credit card accounts just to move money around can hurt your credit.

Finally, don’t disrupt the cycle. Charging more than usual or paying less than usual may be interpreted as signs of financial distress. Maintaining a more-stable history is likely a better route.

7. Protect Credit Against Fraud

Learning how to protect your credit score, finances and identity from fraud, coupled with monitoring your accounts and utilizing credit card services, can increase your personal security both on and offline and make sure someone else’s attack doesn’t hurt your credit.

  • Monitoring. Actively monitoring your transaction records and credit score is one of the most effective ways to identify and prevent fraud. At a minimum you should review your credit and debit card statements monthly and check your credit report annually.
  • Alerts. Many credit companies provide fraud alerts free of charge. When you sign up for email, text or phone alerts you authorize your financial institution to contact you if there is suspicious activity on your account.
  • Online precautions. Protect your identity online by always being wary of any communication that requests credit card information, account numbers, passwords, social security numbers or a birth date. A legitimate alert or confirmation from your financial institution will never ask you to send this information over email. Use strong passwords and change them regularly.
  • Offline precautions. Always shred any piece of mail that contains personal or credit card information before throwing it away. And be aware of your surroundings when giving a credit card number over the phone, because you don’t know who is listening.
  • Choose a card with fraud protection. For example, Discover cardmembers are not responsible for unauthorized purchases on their account. Also look for a program that offers credit card services such as automatic alerts, paperless statements and fraud specialists on staff.

You now know a lot more about your starting credit score — including that it can’t be zero, and being credit invisible won’t help much if you’re interested in applying for credit cards or other loans. The good news is that whatever your initial score is, there are several ways to build a positive credit history — and keep a good credit history and credit score.

Originally published Aug. 21, 2017

Updated July 31, 2020

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