Your credit score is important because it affects your ability to borrow money or get loans, and understanding how it works is an important first step to allowing you to make the most of your score, and access the benefits that can come with this.
We took a closer look at just where your credit score starts, and why you need to worry about it.
If you’re just starting your credit building journey, you may be wondering what does your credit score start at? We provide some answers to this very popular question.
What Is Your Credit Score?
A credit score is a number between 300 and 850 that represents your overall creditworthiness.
It’s calculated by using information from all three major credit reporting agencies — Equifax, Experian, and TransUnion — to determine what kind of risk you pose as a borrower.
The higher your score, the better off you are when applying for new credit, such as a mortgage or car loan.
Your credit score also determines whether you’re approved for certain types of credit cards and other financial products. For example, if you have a low score, you may be denied a card with a high annual fee.
If you do manage to get one, you’ll likely pay more in interest than someone with a higher score would pay.
What Number Does My Credit Score Start At?
Your credit score starts at 300 points. You can find out what number yours falls between by visiting the credit reporting agencies.
It is also a good idea to get into the habit of checking your credit score on a regular basis – this will give you instant updates if something has gone awry, and has been psychologically proven to keep you on track when it comes to making improvements and boosting your score.
How Do You Get A Better Credit Score?
The best way to improve your score is to keep your debt-to-income ratio below 30 percent, which means paying no more than 30 percent of your monthly income on bills like rent, mortgages, and student loans.
This will help you avoid falling into “subprime” territory, which has been linked to lower scores.
If you want to boost your score even further, focus on improving your payment history. Paying your bills on time every month will increase your score, but so will making sure you don’t miss payments due to illness or job loss.
If you’ve had bad credit in the past, there are steps you can take to repair your score. Some of the main ways to boost your credit score from low to high include:
Pay Off Outstanding Debt
You should always try to pay down any outstanding debts – this will go a long way towards building and improving your credit score.
Make it a priority to get on top of your debt by setting up automatic bill pay, and then pay each bill as soon as it comes in. You can also consult with a debt charity or advice center to help you manage large figures and sums.
Keep Your Balance Low
It’s not uncommon to see people with excellent credit who carry balances on their accounts. But these kinds of borrowers often end up getting hit with late fees and higher rates, which hurts their credit scores.
To avoid this, aim to keep your balance as close to zero as possible.
Don’t Use Bad Credit Cards
It’s tempting to use a credit card with a 0% introductory rate, but doing so could hurt your score.
Instead, stick to cards with a standard APR (annual percentage rate) of around 20%, which will allow you to build good habits without hurting your score.
Using only good credit cards helps you build a positive payment history, which goes a long way toward boosting your score. Avoid using store credit cards, cash advances, and other forms of revolving debt, which can damage your score.
Get Adequate Insurance Coverage
Insurance coverage protects against unforeseen events that might otherwise put you behind on your bills. However, many insurance policies won’t cover medical expenses unless you meet specific criteria, such as having a pre-existing condition.
If you don’t have adequate health insurance, consider signing up for an HSA (health savings account). These plans let you set aside money tax-free to pay for future healthcare costs.
They typically come with a deductible, which is the amount you must pay out of pocket before your insurer begins covering your costs.
When you reach your deductible, you can begin contributing to your HSA. Contributions are made through payroll deductions, and they’re usually deducted automatically from your paycheck.
If you do decide to contribute, make sure you save enough to cover at least two months’ worth of premiums.
When you reach your maximum contribution limit, you’ll need to withdraw funds from your HSA to pay for medical expenses.
Once you do, you’ll be able to deposit those funds back into your account when you receive reimbursement from your insurer. This process is known as “rolling over” your contributions.
The key thing to remember about HSAs is that they’re designed to protect you from unexpected medical expenses. If you already have adequate health insurance, you may not need one.
Build Good Financial Habits
Once you’ve built up a solid financial foundation, you can start focusing on ways to improve your credit score. For example, if you want to increase your score, focus on paying off all of your outstanding debts.
You can also look into secured credit cards, which offer rewards based on how much you spend. These cards require you to provide collateral, such as a car title or home equity line of credit, to secure the loan.
The interest rate on these loans tends to be lower than unsecured ones, making them more attractive options.
Final Thoughts
Your credit score isn’t something you should obsess over, but it does play a role in determining whether you qualify for certain types of financing.
By taking steps to boost your score, you can ensure that you get approved for the best available deals, and increase the products and opportunities that you have access to in the long run.
As a current Mortgage Underwriter with 15 years of experience, I have seen my fair share of money-related issues. Whether that be high levels of debt, not enough credit, or simply a lack of funds - I’ve had clients who fit into these categories.
Here I will share tips, tricks, and experiences on how you can get yourself back in control of your finances.
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