Let’s face it: you’re not going to get a great credit score on your own. Just because you had a few advantages in life doesn’t mean that you get to have a higher starting credit score.
Whether you want a rewards credit card or apply for a mortgage, everyone starts somewhere. If you really want to improve your credit score, you need to take responsibility into your own hands. This means you need to start improving your consumer credit report.
How Your Credit Score Works
A credit score is basically a number that shows prospective lenders whether you’re worthy of borrowing money to. In other words, it shows those companies how responsible you are as far as paying back your loans go.
Reporting agencies look for any activity found in your consumer report which determines your credit score. This data is what gets used to predict whether you are a high risk borrower or not. If you are, it means you run a higher risk of not paying back money you borrowed.
This means that if you’ve never tried to borrow money before (even for something simple as opening a credit card), then there will be no activity on your consumer report. It’s a catch-22 because on one hand, lenders don’t like to lend money to people without a credit score, but you need to borrow money to be able to get one.
How to Improve Your Starting Credit Score
It may be hard in the beginning, but the best thing you can do is to apply for something with a high approval rate. When you apply for any type of loan, you’ll get what is know as a hard inquiry logged into your credit report. To many of those (and not getting approved for any of them) may seem a little suspicious.
The easiest way to start building up your credit score is to apply for a credit card that can be secured or unsecured. A secured credit card means that you have to put a deposit down on your card, which can count as your line of credit. An unsecured card just means the opposite.
If you get a loan or a credit card approved, don’t think that you have a credit score right away. It takes time to approve an account and for a loan or credit card company to report any details. That can take as long as six months.
What Your Credit Score Will Look Like in the Beginning
A credit score ranges from 300 to 850. Most likely, you’ll have a number on the lower end of the spectrum since your credit history is still new. The longer you have credit history (or activity on your credit report), the higher that number will be. That is, assuming you’re paying back your loans on time.
As long as you keep paying back your credit card or loans on time, your starting credit score will keep climbing up. You’ll also need to keep accounts open longer as well as have a wide variety of them. Being patient and careful with this process will ensure that you’ll have a healthy credit score.
It still surprises me that it can take six months just to get your starting credit score. You need to diligently work towards building your credit history as you never quite know when you will need a “good credit score”.