Your Credit Score: Where It Starts and How to Raise It

A person’s credit score can majorly impact big financial purchases in someone’s life. This post discusses common questions about credit, such as: What is credit? What does your credit score start at? What can you do to raise it?

Let’s get started.

Click to jump to a section:

What is Credit?

If you had asked me this question when I was 18, the answer would’ve been disappointing. I would’ve said it is the little piece of plastic I keep in my wallet that I use to buy as much as I want, whenever I want, and I only must make a minimum payment each month. 

If you’re asking me this now, at 28, recently married, and a first-time homeowner, I would say it’s the most important thing I have that shows I’m a credible lendee. It shows that I’ve borrowed money in the past. It shows that I paid it back. It shows that I paid it back on time

And most importantly, it shows that I can be trusted. 

Having a solid credit score will allow you a greater opportunity to borrow money for things that might not normally be purchased out of pocket. Think of a house, car, boat, anything, or even just simply when applying for a credit card. In my opinion, credit shows exactly how reliable someone is with their money.

What Does Your Credit Score Start At? 

You can find this in many ways. My preferred method is to download the Credit Karma app. 

You will be asked to enter some personal information needed to look at your financial history. Done. Now you can see your credit score. You can open the app as frequently as you’d like and see your score. 

When I started monitoring my credit, I was scared that it would negatively impact my score every time I looked at it. What I learned was that I was wrong. 

Any credit pulled for a hard inquiry, such as a loan or credit card application, will negatively impact your score. The credit bureaus assume you are asking for more credit to spend more money. But simply checking your score is an example of a soft inquiry and has no impact whatsoever on your score.

So, what does your credit score start at? When I first started monitoring it, I was in the low-600s. This is the “Fair” category, per the Fair Isaac Corporation (FICO), as FICO was the first company to assign a score to determine credit risk. 

credit score ratings

My credit has significantly increased since then, but it definitely wasn’t easy. It took a lot of work. In the last 6 months alone, my score has jumped over 60 points, and I am now into the “Excellent” score rating per Credit Karma. I’m not saying this to brag – I’m stating this to show that it can be done and to explain my process.

What Affects Your Credit Score?

Hard Inquiries

This essentially shows how often you are applying for new credit. Why is this important? The more new lines of credit you apply for, the less likely you are to be able to pay back those loans. That is a major risk to a lender. Hard Inquiries will typically stay on your report for up to two years.

Suggestion: The sweet spot tends to be only having 1-2 hard inquiries every 2 years, which should be plenty. 

I understand there are times when you might have a mortgage, car loan, credit card application, and maybe a loan for an engagement ring all pop up in the same 2-year period. But try to be strategic and apply for loans only as needed. Do your best to only have one inquiry on your report at a time.

Age of Credit History

Credit age is an important factor in your credit score. Lenders trust someone who has been responsibly using credit for decades more than someone who just started. You have not yet proven yourself as a reliable borrower.

This is why leaving your oldest line of credit open is important. This skews your average credit age, helping you appear more trustworthy.

Suggestion: If you’re going to sign up for new cards, it will hurt you on the hard inquires section. However, don’t close your current card and let it ding you on the average age either. Just cut the cards up so they can’t physically be used anymore and let the account sit there. You’ll continue to increase your credit age, and it won’t hurt you to close a card.

Credit Utilization

Your credit utilization is the percentage of your total credit card limits you have used. For example, if you have 3 cards with $5,000 limits, and two are paid off, but you owe $5,000 on one of them, your total utilization is 33% ($5,000/$15,000 = 33%). Under 10% is Great, and 10-29% is considered good, so you would be just above the good category.

Suggestion: First and foremost, pay down your credit cards. This is the easiest and fastest method to have a meaningful impact on your credit score. 

Suggestion: Second, you can ask your credit card companies to increase your credit. The higher your credit limit, the easier it is to keep a lower utilization.

Asking for a higher credit limit is usually done online, though you can also go in person. Most companies let you request a higher limit through their app or website.

In our previous example, if the two paid-off credit cards increase to a limit of $7,500, then your new utilization is 22.5%, so you’re now in the good category! That’s quite the improvement from just communicating with your credit card company.

Number of Accounts

This section is a simple count of how many accounts you have open. To put it simply, the more accounts, the better your score. The more accounts you have open, the less volatile you appear to be. 

For instance, your first account or two might have had missed payments, high outstanding credit, etc. Maybe you’ve become a more reliable lendee, and now you have 15 accounts that are all in good standing. In other words, it’s like a multiplier. One good account is not as reliable as 15 good accounts.

Suggestion: Open accounts only on an as-needed basis. Do not open an account just to open one. But if you happen to have older cards open, cut it up and let it sit unused but open. 

When I was in credit card debt in college, I would cut up the cards, pay them off, and then leave it. Having an open line of credit that’s inactive doesn’t hurt you – it actually helps you.

Derogatory Marks

This portion tracks how many times you’ve had an account go to collections. 0 is good, and 4+ is listed as the absolute worst section. These can stay on your record for 7-10 years so it’s incredibly important to avoid them at all costs.

Suggestion: Simply put, don’t ever, ever, ever let an account have to go to collections. Set up your autopay to make minimum payments at a MINIMUM. They’re called minimum for a reason….

Payment History

Payment history measures how frequently you’ve made your payments on time. If you’ve made a late payment, it will also tell you how late it is. So, to be honest, I missed a payment in November of 2016 on my Chase card. It wasn’t that I couldn’t afford it; I was dumb and forgot…for too long, so I was dinged as being 30-59 days late. 

Suggestion: This is very similar to the previous suggestion, but set up an autopay to make your payments. You can pay more if you’d like (and you should unless you love and crave paying 22%+ on credit card balances). This will keep you from making late payments like I did in 2016. 

Credit Karma is also very cool because it shows your on-time payments / total payments. I’ve been on time 424/425 times. That seems pretty good to me, but that’s still listed at 99%, which only gets me the Good category and not the Great. Frustrating, but I can only be frustrated at myself. 

I urge you to not make the same mistake that I did and set up autopay. The future you desire for you and your family will be much easier with a higher credit score.

Closing Thoughts

All in all, credit is a scary word that should be viewed as a good thing. I feel proud when people have to check my credit for various reasons. It’s a sign of honor to me. It’s not that amazing 850 score, but it’s also not the low 600’s. It shows that I’ve worked hard and that I’ve grown as a person and as a lendee. Follow some of these simple steps, and you might find yourself in the same situation in a few months.

Learn the art of investing in 30 minutes

Join over 45k+ readers and instantly download the free ebook: 7 Steps to Understanding the Stock Market.

WordPress management provided by