budget living

Starting Credit Score

It seems fair that we all should start out with a decent credit score, right? After all, we have not yet done anything wrong to prove ourselves untrustworthy. However, we also have not accomplished much to prove that we can indeed be trusted. Therefore, you may be disappointed to find out, we do not magically appear with a nice healthy score when we are first starting out.

In fact, it takes many months to even get your credit score to square one. Then, you have to climb all the way from neutral territory into more positive credit scores. This process can take time.

Although many of us like short-cuts (like box brownie mix), our credit scores must be created from scratch. We must develop every aspect of it on our own, as we push forward. We are doing things the homemade way, if you will. No short-cuts allowed!

Why Are Things This Way?

There is no magical automation that inserts 18-year-olds into the credit score system. In fact, we are born with no consumer report at all. When we are starting out, it says “no record found.” We have to develop our consumer report on our own. You see, the government is not keeping track of every 18-year-old who is now eligible to form a credit score. Instead, we fly under the radar until we begin the process ourselves.

As we first borrow money, the lenders report us as new account information, because of our lack of records. This is how the process begins.

In the Beginning…

We all begin without any credit score, due to the consumer reporting agencies’ lack of data on us. However, without a score, how will banks measure our reliability? Unfortunately, banks and lenders are very stingy about lending to newbies without credit scores.

In the end, you will hopefully find someone willing to give you a chance. Someone will break the cycle and you will finally get your first loan. This is where your credit score story begins.

It is not instantaneous, because you are still too new to rate. A few months in, you will receive your starting number. (Usually this takes about 6 months.) 

What happens next?

At this point, newbies really begin to separate from each other. Our credit scores distinguish how we are doing so far, and we finally have some sort of history to show for ourselves.

Most credit scores range from 300 (lowest) to 850 (highest). The median credit score is 723, with 50% of the population rising above, and 50% of the population falling below.

The first credit score that you receive after the initial six months will most likely fall beneath the median. It will take time to work your way above that line.

It is important to watch your credit score and to be proactive and vigilant while making your credit payments. Your credit score requires nurturing, specifically when you are first starting out. The only way to better your score is by being responsible now. If you have not taken the first step towards creating your initial credit score, then begin today.

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