Where does your score come from?

Excellent credit score
TierneyMJ / Shutterstock

You might assume that, since you’re a total unknown, your starting score will be zero. But in fact, prior to having a credit history, you have no score at all.

Your starting score will only be calculated once you’ve had credit, such as a credit card or a loan, in your name for at least six months.

The three big credit-reporting bureaus — Equifax, Experian and TransUnion — have access to slightly different information about you and use that information to score you in slightly different ways.

However, the scoring model they use most often comes from the Fair Isaac Corp., also known as FICO. These scores range from 300 to 850; the higher your score, the more trustworthy you appear to lenders.

When the formula is first applied, your credit score will probably land somewhere in the fair range, right around the middle. You haven’t had time to do much harm but you also haven’t proven yourself, either.

You won’t get access to sizable loans and good interest rates until you reach the higher end of the scale. Here’s how to boost your credit score in record time.

What goes into my score?

Checking credit score
Andrey_Popov / Shutterstock

Five factors contribute to your FICO score, though some carry more weight than others:

Payment history (35%)

This is the single most important factor in determining your creditworthiness. Every missed payment, from credit cards to phone bills, can stain your credit report for up to six years. Be sure to make payments on time and in full if you want to raise your credit score.

Credit utilization ratio (30%)

If you’re borrowing close to your limit, you’re hurting your score more than you may know.

Credit utilization is the ratio of credit used versus the total credit available to you. So if you’ve racked up $700 of debt on a card with a $1,000 limit, you would have a 70% utilization rate on that card.

For a good score, you’ll want to keep your total utilization across all of your balances below 30%.

Credit length (15%)

Lenders want to see a long history of responsible borrowing. If you’re just starting out, use your first card with this future goal in mind.

And make sure not to cancel any cards without good reason. Having an old card on file, even if you don’t use it anymore, shows lenders that you’re an experienced borrower.

Credit mix (10%)

Lenders will be pleased to see that you’re a whiz with a credit card — but what about car loans, mortgages, student loans and lines of credit? A diverse borrowing history can show lenders that you’re responsible with all kinds of loans.

Hard inquiries (10%)

When you apply for a new loan or credit card, lenders will peruse your financial history to see if you’re a safe bet or not.

Too many of these checks, called hard inquiries, in a short period of time would suggest that you’re churning credit cards, using new loans to cover old debts or you’re broke and desperate for cash.

After undergoing a hard inquiry, keep an eye on your score and try not to apply for any new credit cards or loans until you see it go back to normal.

What if I have bad credit or no credit?

Secured credit card
Yulia Grigoryeva / Shutterstock

If you’re unable to get a normal credit card, one way to build your history and improve your score is to open a secured credit card, instead.

Secured credit cards require you to pay a deposit, which is held as collateral until the account is closed. If you don’t pay your bills, the lender gets to keep your deposit. Secured credit cards are easy to get but may not improve your score as effectively as a regular, unsecured card.

Another option is a credit-builder loan, an unusual product solely designed to show off your ability to make regular payments. The lender actually holds on to the amount you “borrow,” only releasing it to you after you’ve paid off the balance over time. These loans still aren’t free, though, so make sure you’re prepared for the interest rate.

Once you’ve paid it off, your credit score should go up, and you can invest some money for your future.

How do I monitor my score?

With so many factors affecting your score from month to month, it can be hard to tell how much of an impact your efforts are making. Thankfully, a number of free online services allow you to monitor your progress.

One popular option in the U.S. gives you access to your credit score for free, as well as a suite of services to improve your financial health.

By keeping a close eye on your credit, you’ll be able to get your score in the green and unlock money-saving rates that will pay off for years to come

About the Author

Shane Murphy

Shane Murphy


Shane is a reporter for MoneyWise. He holds a bachelor’s degree in English Language & Literature from Western University and is a graduate of the Algonquin College Scriptwriting program.

You May Also Like

5 Wise Money Moves Before the Fed Starts Raising Interest Rates Again

Time's almost up on ultra-low rates, so don't be caught off guard.

Want to Earn Big Returns Without the Shaky Stock Market? Try Art

Art investment is no longer reserved for the wealthy

How to Get a Free Credit Score

It's simpler than ever to get a free credit score.

Do Big Stores Save You the Most? We Price-Check Our Shopping List

With one 30-second trick, we found $460 in savings beyond Walmart and Amazon.