Your credit score is determined by things like payment history, amounts owed, and amount of new credit Show
When you start thinking about building credit, you may ask yourself: Where do I start? What is my starting credit score? The answer to that question will be unique to you. Believe it or not, everybody doesn’t start with the same credit score. People will start with different credit scores based on all kinds of reasons. If you want to understand your credit score and set goals for your credit score, it’s important to learn about what a credit score is. What is a credit score and where do they start?A credit score helps lenders evaluate your experience with credit and influences the credit that’s available to you, including loan and credit card approvals, interest rates, credit limits and more. Credit scores are based on your credit history. Before your personal credit history (such as number of accounts, on-time payments, etc.) appears in a credit bureau’s file, your credit score simply doesn’t exist yet.
How do credit scores work?Once you get approved for credit products such as credit cards and loans, you begin to build a credit history, and the credit bureaus will use that history to calculate your credit score. In order for a FICO® Score to be calculated, your credit report must have:
The minimum scoring criteria may be satisfied by a single account or by multiple accounts on a credit file. What goes into a credit score?While different credit score models may weigh various factors differently, 90% of top lenders use FICO® Scores, including Discover.1 The factors FICO uses to calculate your credit score include:
How to start a credit scoreBuilding a credit history will start you on your way to having a credit score. If you’re ready for your first credit card, it may help you with building your credit. If you have no credit history, you may want to consider starting with a secured card, or if you’re in college, a student card. How to stay on top of your credit scoreOnce you get started with your first credit account, check your credit score regularly. With Discover, cardmembers get a Credit Scorecard for free that includes your FICO® Credit Score.¹ You can also ask for a free credit report annually from the three major credit bureaus via AnnualCreditReport.com. To keep a good credit score, use credit smartly. Don’t max out your credit cards, and don’t apply for too much credit at once. Be sure to pay your bills on time every month and pay the balance in full whenever possible. You now know a lot more about your starting credit score, and the good news is that whatever your initial score is, there are ways to build a positive credit history — and keep a good credit history and credit score. You need at least a 620 credit score to buy a house with a conventional loan in 2022. But, you’ll find that there are several other loan types that have much lower requirements. Many first-time home buyers worry that their credit scores are too low to buy a home. First, know that whether your credit score is “good” or “bad” is subjective and won’t affect your home-buying. Second, mortgage lenders are bound by specific rules which determine what credit scores you need to buy a house, and those rules vary by your loan type. Conventional loans are the most common loan type. On the credit score scale, which ranges from 350-850, conventional loans require a credit score of at least 620. Other loan types allow for lower credit score minimums, and some mortgage programs have no credit score requirement whatsoever. Here’s what credit score you need to buy a house. The Minimum Credit Score Needed to Purchase Your First Home Minimum Credit Score Needed to Buy a House by Loan TypeConventional Loan | Credit Score: 620Conventional loans are the most common home loan and have a hard minimum credit score of 620. Conventional loans are issued through mortgage lenders, mortgage brokers, and credit unions. Conventional loans are the default option for home buyers because of their low rates and simple approvals. Conventional loan approval requires:
Check your eligibility for a conventional loan. FHA Loan | Credit Score: 580FHA mortgages are the original mortgage loan, developed by the Federal Housing Administration in the 1930s to keep homeownership attainable. FHA loans are more inclusive than other loan options because of their relaxed down payment requirements, and because the FHA doesn’t change your interest rate based on your credit score. In fact, FHA loans don’t require home buyers to have a credit score at all, although many lenders want to see a minimum score of 580. FHA loan approval requires:
Check your eligibility for an FHA loan. VA Loan | Credit Score: 580VA loans are backed by the Department of Veterans Affairs. VA loans are affordable home loans for active-duty servicemembers and veterans. Because the VA guarantees its loans against losses, mortgage lenders make VA loans at very low-interest rates and, historically, VA mortgage rates are often the lowest of all available mortgage loans. VA loans don’t require a down payment. VA loans:
Check your eligibility for a VA loan. USDA Loan | Credit Score: 580USDA loans are government-backed mortgages available for homes outside of densely-populated areas. The USDA program covers about 91% of the U.S. including rural areas, small towns, and many suburbs. USDA mortgage loans don’t require a down payment and offer interest rates that average 0.50% lower than conventional loan rates. USDA guidelines require credit scores of at least 580, but exceptions can be made for home buyers with extenuating circumstances. USDA loans:
Check your eligibility for a USDA loan. Jumbo Loan | Credit Score: 680Jumbo loans service home buyers whose mortgage loans are too large for the local mortgage loan limit. There is no specific credit score requirement for a jumbo mortgage, though higher scores are more likely to be approved and may be assigned a lower interest rate. Jumbo loans can be used for a variety of property types. Jumbo loans:
Check your eligibility for a jumbo loan. What Changes Your Credit Score?Credit scores help your lender determine the likelihood that you’ll make timely mortgage payments. Fair Isaac and Co. (FICO) uses these factors to calculate your credit score:
These 5 factors provide a glimpse into your financial habits and history and help lenders assess your financial health. Home buyers with lower credit scores are typically assigned a higher interest rate. Get pre-approved for a mortgage today. Get my pre-approvalHow to Improve Your Credit ScoreTo boost your credit score for your upcoming mortgage approval, first, check your credit report to learn what’s comprising your score. All consumers get access to a free annual credit report at AnnualCreditReport.com. You can also check your credit score by getting pre-approved. If you’ve never reviewed a credit report, it can feel overwhelming. There are public resources that can help you, or you can ask for help in our chat. We’ll consider the factors that impact your credit score and discuss ways to make improvements, like opening a secured credit card account or shifting balances between charge cards. Here are the best habits to improve your credit score:
Credit scores don’t improve overnight, and keeping your debt to a minimum pays off when you’re planning to buy a house. Even small credit score improvements can reduce the interest rate you get, which saves you tens of thousands of dollars in the long run — enough to fund a retirement or college tuition! Learn more about how to fix your credit to buy a home. What Mortgage Lenders Look For When Approving a Home LoanWhen you apply to get pre-approved, your lenders will review your credit history and consider your current credit outlook. This includes looking at:
Lenders ask these questions to get comfortable with you. Your financial health isn’t the only consideration lenders make, but how you manage your bills tells a large part of your story. Lenders also look for specific credit events known as derogatory items, like bankruptcy or delinquent accounts. Derogatory items don’t disqualify a mortgage approval. Generally, it’s only required that they’re historical events and not current ones. For example, you can get approved for a mortgage if you’ve declared bankruptcy in the past, or if you’ve lost a home due to foreclosure. Lenders know that life is unexpected and bad things happen. What’s important is what’s happened in the time since the derogatory event occurred. Lenders do not consider medical debt a part of your credit score. How to Buy a House With Bad CreditYou don’t have to give up on your dream of homeownership because of a low credit score or less-than-perfect credit history Here are a few ways first-time home buyers buy homes with bad credit or no credit: 1. Cancel Out Your Low Credit Score With A Larger Down PaymentLow credit scores create risk for mortgage lenders, and large down payments take the risk away. Therefore, buyers with the ability to increase their down payment size are more likely to get mortgage-approved. 2. Ask Multiple LendersThe U.S. government establishes rules for conventional, FHA, VA, and USDA loan approvals, but mortgage lenders sometimes create additional, more stringent requirements to be met. If your mortgage application doesn’t pass its first test, try again with a different mortgage lender. It’s common for loans to be approved on the second or third attempt. 3. Get a Co-SignerIf you’re unable to qualify for a mortgage and have somebody in your life who would serve as co-signer, ask your mortgage lender the best path forward. A co-signer is somebody who agrees to joint responsibility for your mortgage, including repayment. Co-signers don’t have to live with you, but they will share ownership of the home. If you can’t qualify on your own, then this is worth exploring. Our Advice – Get pre-approved to find your true credit scoreYour credit score isn’t the only factor for mortgage approval. However, it’s a key indicator of your financial health. Track your credit, make on-time payments, and get help to choose the home loan that’s right for you. What credit score do you first start with?The base credit scores of the most popular credit-reporting models start at 300. Starting with a score of around 300 is possible only if you've managed your finances poorly. You may start to build a credit history or improve your score without using any type of credit.
What credit score does an 18 year old start with?If you haven't yet built a credit history, there's no information on which to base that calculation, so there's no score at all. Once you begin to establish a credit history, you might assume that your credit score will start at 300 (the lowest possible FICO® Score☉ ).
What credit score does a 21 year old start with?The average FICO® credit score for those in their 20s is 660. Between the ages of 20 and 29, consumers are starting to build their scores. These consumers may have a low-limit student credit card and are making payments towards their student loans.
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