Does your credit score start at zero when you enter the credit world? Or is there some other magic number? That’s a valid question if you want to start building credit to apply for a loan or credit card, rent an apartment, or conduct some other transaction that warrants a credit check.
Where Does Your Credit Score Start?
Credit scores range from 300 to 850 – the higher your credit score, the better. Your credit score cannot be established until you have credit accounts linked to your Social Security number.
The good news is your score doesn’t technically start at zero. If you have never opened a line of credit, creditors will see that your profile hasn’t been established yet and there is no score available to view.
To create your profile, take out a Credit Builder Loan or apply for a low limit secured credit card and make consistent payments. Credit Builder Loans are loans specifically designed to build your credit by reporting your manageable payments to the credit bureaus.
You shouldn’t expect an 850 credit score after a few months of having a line of credit, but a score in the range of 600-700 for beginners is average.
What’s In Your Credit Score?
Wondering what factors are used to calculate your credit score? Here’s a quick breakdown:
- Payment history (35% of your credit score): creditors and lenders want assurance that you can handle your outstanding debt obligations. If late payments are present in your credit report, you pose more of a risk and could be denied for credit or assessed a higher interest rate. Also, know that a single late payment can tank your score by up to 100 points and will linger on your credit report for 7 years. However, the negative impact starts to decrease as time passes.
- Amounts owed (30% of your credit score): Aim to keep your credit utilization ratio, or the percentage of debt in use on your credit cards, to 30% or lower. This gives you the best chance of maintaining a solid credit score.
- Length of credit history (15% of your credit score): A lengthy credit history also helps boost your credit score. It demonstrates to creditors to lenders that you have experience managing loan and credit card products.
- Credit mix (10% of your credit score): You should have a balance of installment (loans) and revolving (credit card) debt.
- New credit (10% of your credit score): Applications for credit result in hard inquiries, which reduces your credit score by up to 10 points. The good news is that multiple inquiries for a loan product, like a mortgage or card, will only count as one hard inquiry if generated in a short span.
An Easy Way to Build Your Credit from Scratch
Did you recently discover you don’t have a credit score yet? If you are wondering how you are going to build credit if you can’t get a traditional loan or credit card, consider the Credit Builder Loan up to $1,000 from MoneyLion.
It’s a component of the Credit Builder Plus membership and allows you to get started on your credit-building journey while putting some money in your pocket. There’s no credit check, and it’s easy to get started. The best part: It’s proven to work. Most borrowers raise their credit by over 60 points in their first 60 days.
Here’s how the Credit Builder Loan works:
- Download the MoneyLion app, create your profile and link your bank account.
- Submit the Credit Builder Loan application to get an answer in minutes. You just need a bank account that’s 60 days old and in good standing to qualify. It should also reflect a steady source of income (benefits checks are acceptable) in the transaction activity. There’s no credit check.
- Accept your loan offer and receive the proceeds in your bank account. (Quick note: MoneyLion may withhold a portion of the funds in an interest-earning Credit Reserve Account and give it to you after you pay the loan off). The point of the loan is to build credit.
- Automatic loan payments are deducted from your bank account. This prevents you from having to worry about due dates. Plus, payment activity is reported to the 3 credit bureaus – Equifax, Experian and TransUnion – to build your credit.
Take advantage of this loan product for only $19.99 per month. The monthly fee includes access to 0% APR Instacash cash advances of up to $250, credit monitoring with weekly score updates, and more.
Where to Find Your Credit Score
You can view your credit score through MoneyLion’s Credit Score Tracking feature. It only takes a few minutes to sign up as part of the Credit Builder Plus membership, and you will be alerted any time activity takes place in your credit file. When you log into the app, you can view all your credit accounts, your credit score, and tips to help improve your score.
How to Boost Your Credit Health Over Time
It’s not enough to build up your credit health and forget about it. You want to continue working towards a higher score or at least maintaining the one you have! A few tips to help you boost your credit health over time:
- Make timely payments on your debts.
- Get current and stay current on any past due obligations.
- Pay down your outstanding credit card balances.
- Don’t close old credit card accounts.
- Only apply for credit as needed.
- Maintain a healthy mix of revolving and installment debt.
Most importantly, you only want to use credit when absolutely necessary and keep your debt balances to a minimum. Doing so gives you the best chance at achieving a good or excellent credit rating in record time.