There are 5 main factors based on which your credit history is calculated: payment history, amounts owed, credit history length, new credit and credit mix.
18 years is an expected date in the life of every person, as he finally becomes an adult and receives some rights such as the right to vote. However, with this date comes responsibility as well, as you are now eligible to apply for the loan. However, in order to get it, you must have a loan. But what is your credit score when you just turn 18?
What Is Your Credit Score When You Turn 18?
How your credit account starts is an interesting question. In fact, you don’t start with any credit rating at all. So it doesn’t work so you get a credit score as soon as you turn 18. So the answer to the question “do you have a credit score at 18” is no. One of the most famous credit scoring methods is FICO, and in order to get a credit rating you must meet certain requirements. Thus, until you fulfill the requirements, you will not have any rating. So, in order to get a FICO credit score, you must have at least one credit account (which has been open for 6 months or more) and a credit account that has been reported to credit bureaus (also within the last 6 months). Also note that it can be as one account or several.
What Does Your Credit Start At?
When you qualify for a credit account, your FICO score starts from a minimum of 300 to 850, which is considered an excellent credit score. However, it is important to note that when you turn 18 you do not get 300 and move up with them. Instead, FICO has its own credit rating formula.
What Makes Up Your Credit Score?
So, in order to know how to build credit at 18 you need to know what your credit account generally consists of. There are 5 categories that are used to calculate your FICO credit score:
- Payment history. About 35% of your credit score is your payment history as it helps lenders know if you will pay your bills on time. Thus, this category is perhaps the most important. Keep track of timely payments in order not to worsen your credit score.
- Amounts owed. 30% of your FICO score is your amounts owed. The loan utilization ratio shows how much debt you have compared to the available loan. Therefore, you must make sure that your credit card has a low percentage of the specified credit limit.
- Credit history length. About 15% of your FICO score is the length of your credit history. Thus, the age of your old credit account, the average age of all your accounts, and the age of each of your accounts are taken into account.
- New credit. 10% of your account is in the new credit category which includes two things: new credit accounts and credit inquiries. Thus, when you apply for a new credit account, a hard credit dash is performed. A large number of inquiries can worsen your credit.
- Credit mix. 10% of your account is your credit mix, that is, the different types of loans you have. Lenders want to know that you can handle different types of loans responsibly.
How To Get Good Credit Score At 18?
There are several options for how you can maintain a good credit score as soon as you turn 18. Learn the main ones:
- A credit builder loan. These loans, available in banks and credit unions, help you borrow money that you will only have access to after the loan has been paid off. You will need to provide proof of income in order to receive a loan. While you are making timely payments, the bank will report this to the credit bureaus.
- Secured credit card. This card requires an advance refundable deposit of $ 200 to $ 2000 which will be your credit limit.