Credit scoring does not work like a video game; the credit bureaus won't start you off with any points. While not having a credit score detracts from your financial profile, it also puts you in a good position to build a clean and positive credit history. In some cases, a limited credit history gives the impression to lenders that you are more creditworthy.
When the credit bureaus contain no information on your financial history, you will not have a credit score. Instead, lenders that try to calculate your credit score receive a result of "insufficient credit history." You might have a nil credit score with some credit history on your profile. It typically takes at least six months of payment history for the credit bureaus to calculate a score, according to Mortgage News Daily.
The credit reporting bureaus do not rate new borrowers along with borrowers who have long credit histories. Thus, once you build enough history to receive a credit rating, you might have a much higher score than if the bureaus compared you to an experienced borrower. However, when your "scorecard" changes from new borrower to experienced borrower, your credit score could drop if your credit history looks poor compared to other borrowers with experienced scorecards.
Starting Your Credit History
You must use a creditable account or take out a loan from a lender that reports activity to at least one of the major credit bureaus. Unless you know someone who agrees to add you as a co-signer to an account, you will likely need to apply for a credit card that has low requirements. Store credit cards and secured credit accounts typically have weak standards. In the case of a secured card, you usually only need to put a security deposit against the line of credit to qualify.
Until you manage credit for a decade or more, a short credit history negatively affects your credit score, because credit history length counts for 15 percent of the FICO score. You can probably offset most or all of the damage from a short credit history by keeping credit card balances low and never missing payments.
- Experian: Credit Score Basics
- Privacy Rights Clearinghouse: Your Credit Score: How It All Adds Up; 2010
- Mortgage News Daily: Understanding Your Credit Score; Glenn Setzer; 2005
- MSN Money Central: Weird Stuff That Wrecks Your Credit; Liz Weston; 2009
- Federal Trade Commission: Need Credit or Insurance? Your Credit Score Helps Determine What You’ll Pay; 2010
- Fair Isaac Corporation. "What is a Credit Score?" Accessed Oct. 11, 2020.
- VantageScore Solutions, LLC. "Who Uses Credit Scores?" Accessed Oct. 11, 2020.
- VantageScore Solutions, LLC. "Free Score Providers." Accessed Oct. 11, 2020.
- Fair Isaac Corporation. "What's In My FICO Scores?" Accessed Oct. 11, 2020.
Russell Huebsch has written freelance articles covering a range of topics from basketball to politics in print and online publications. He graduated from Baylor University in 2009 with a Bachelor of Arts degree in political science.