Have you ever wondered what credit score everyone starts with? You might be surprised to learn that it takes over six months just to get to square one!

Nobody is born with a consumer report. Reaching your eighteenth birthday does not automatically set the wheels in motion at the bureaus.

Learn how to build your credit score from scratch. Everyone began somewhere – with nothing!

What happens next is up to you.

  • Implications for young adults turning 18 with no credit history
  • How to use five factors to establish and build a positive rating
  • Examples of beginning ranges after opening a credit card
  • Why the opening number should be similar at the three bureaus

Does Everyone Have a Default Credit Score?

Everyone does not automatically have a default or baseline credit score. First, consumers must establish an account relationship with a lender. This might be a credit card, unsecured installment loan, auto financing, or another borrowing contract.

Then the lender must report the trade to at least one of the consumer reporting bureaus. The information will then appear on your credit report within a few days. Finally, you will then have your first rating after waiting for six months.

No Credit History

Your credit score cannot start without establishing a credit history first. Each equation has minimum requirements for information on a consumer report. Therefore, they will not output a valid number until your file meets these three criteria.

  1. One or more accounts open for 6 months
  2. At least one account updated in last 6 months
  3. The file does not flag the account holder as deceased

The formulas need information in order to predict future behavior. The bureaus will report “No Record Found” until a bank or other lender communicates at least one borrowing relationship.

People with no credit history do not have an initial rating until 6 months after opening their first borrowing account. Until this time, most equations will output a code indicating “Too New to Rate.”

Turning Age 18

Your credit score does not automatically start when you turn 18. The government does not supply the agencies with the social security numbers of teenagers reaching the legal age of adulthood. In addition, nothing magically appears on your consumer report.

Teenagers turning 18 years old have no credit history until they open a new borrowing account. They will have their initial rating 6 months after getting an approval from their first lender.

Young adults reaching the age of 18 do have the legal right to borrow money under their own name. In addition, they can become authorized users or have their parents cosign an application.

This is the answer for how to establish and build a positive history of managing money responsibly.

Establishing & Building

How do you establish and build your credit score from nothing? Begin to feed your consumer report the information it needs – your behavior with borrowing money from an institution and then paying it back with interest. Credit means the consumer creates a liability.

The most frequently used equations consider five important components.

  1. Payment record 35%
  2. Amounts owed 30%
  3. Length of history 15%
  4. Mix of account types 10%
  5. New credit activity 10%

Key Components

Establishing a record means opening a new account at an early age. It takes time to stretch out the length of history (3). You need to extend beyond the minimum length of 6 months.

Building a positive record means concurrently balancing the remaining four factors.

  • Applying for new borrowing accounts gradually over time (5)
  • Opening a diverse mixture of account types (4)
  • Keep the outstanding balances low (2)
    • Relative to the revolving limit
    • Relative to the original installment principal
  • Make payments on time according to terms(1)

Debit & Prepaid Cards

You cannot build your credit score using a debit card or prepaid credit card. These financial instruments do not represent a borrowing relationship with the institution. The consumer does not create a liability.

Debit cards allow consumers to withdraw up to the amount already deposited into a checking account. Prepaid credit cards allow a holder to spend the amount previously loaded. Consumers create assets when using these instruments.

Banks do not report asset-based debit and prepaid credit card information to the consumer agencies. Therefore, the equations cannot use these data to make predictions about future behavior.

Social Security Number

You can build your credit score without a Social Security Number (SSN).

Foreign nationals living in the United States can apply for new borrowing accounts using an Individual Taxpayer Identification Number (ITIN). In addition, some banks will approve applicants without the ITIN or SSN.

The consumer agencies can combine the reported data together into a single file without the SSN or ITIN. The bureaus also use other identifying data elements to match records such as date of birth, first and last name, generation codes, plus current and previous addresses.

Average Starting Credit Score Ranges

Now we can utilize the five primary factors to estimate the average or typical starting credit score range. With some many variables, it is impossible to determine a normal beginning point.

Estimates and examples of beginning ranges are more realistic. The reasoning outlined above follows the same logic regardless of which bureau supplies the underlying report and equation result.

FICO Ranges

Credit scores do not begin at zero. That would make too much sense. Several companies such as Vantage recently made an effort to scale the ratings from 0 to 100. This would have made things easier for consumers to understand. However, the concept never caught on.

Instead, the industry moved to a standard range set by FICO decades ago. This scale begins at 300 (lowest possible) and ends at 850 (highest possible). The median number is 723. This means that 50% of the population has a higher number, and 50% has a lower number.

Lowest & Highest

Consider these starter credit score ranges for someone getting their first unsecured credit card.

Lowest Highest
Payment record 180 days late Current
Amounts owed 100% utilization <25% utilization
Length of history 6 months 6 months
Mix of types 1 1
New activity Hard Inquiries No inquiries

In this example, the person with the lowest initial rating might be very close to the 300 end of the scale. Poor payment performance and high balances for the credit card have an immediate negative effect.

Meanwhile, the person with the highest initial rating might be closer to the median number in the fair category. It takes time and diversity to move the needle upwards. Opening the credit card does not work quickly.

Opening ratings go down much faster than they go up.

Ranges by Bureaus

Apply the same lessons to estimate the starting credit scores ranges for FICO and Vantage at each of the three major bureaus. The rating equations have similar meaning, distribution, and breakdown across Equifax, Experian, and TransUnion – except when anomalies occur.

Range Equifax/Experian/TransUnion
Poor 300 – 579
Fair 580 – 669
Good 670 – 739
Very Good 740 – 799
Excellent 800 – 850

Both FICO and Vantage are general-purpose tri-bureau ratings. Lenders utilize the formulas with the expectation that the resulting number means that same thing, regardless of which agency supplied the underlying data.

Expect your first credit score to be slightly different at each of the bureaus. This should continue with your second and third ratings as well. While the equations have similar meaning, distribution, and breakdown, they rely on data from agencies with unique business rules and processes.

Any major differences could mean that data is missing or incorrect at one or more of the repositories. Request a copy of all three reports to detect any anomalies. File a dispute if you find any errors.