Numbers define our existence when you really think about it. When you are born, you receive your Social Security Number, and hopefully, if our entire financial infrastructure is not in total shambles 50 years from now you will have a nice nest egg. In regards to the finances, when you begin your journey with your personal credit you have a credit score. But, where do you start?
Most people think once you use your first credit card you automatically have a three-digit number that is your credit score. This is furthest from the truth, in fact, when you decide to start using a credit card, you start at zero. Regardless of how much money you make, your race, job title or whatever category you can muster up, we all begin with a zero on our consumer report.
This is because to get credit you have to earn it. You have to go out in the world each day and use that credit card. Max out your card even; then apply for another card to help pay for the other one. That is how you build credit. We are joking of course, but for the most part, the only way you can start build solid credit is by buying things and when the time comes pay off your debt. This is how you start building your credit.
Most people do not know that it actually takes about six months before your credit report begins to reflect your score. Since you are a new lender essentially you have a clean state to start with. Most consumer report will start your score in the middle of the pack. Not too high or too low. Usually, the low end is around 300 and the high end is 800 or higher. Depending on how you handle your bills you could have a score closer to each end.
You are new to the club, so your file has a lot of growing to do.
With no prior credit history, you are in a state of limbo. You do not have good credit or very bad credit you just have credit. Since you are essentially a new fish, you have what lenders call a thin file. This means that you do not have enough credit history to warrant a high score.
Regardless of your standing, you need to build your score before you are impacted positively or negatively. Before you decide not to pay your first bill, however, you should also know that missing a payment or not paying your bills at all can make it harder for you to increase your credit score.
Can you reset your credit?
For the people that are stuck in a rut with mountains of bills and debt, there may be a solution for you, bankruptcy. Filing for bankruptcy has been labeled by many as a sign of failure. If used correctly, however, you can start with a clean slate. Hell, even our 45th president has filed for it. While it can be helpful you also want to make sure all your finances are in order. You will be giving people permission to invade your personal finances.
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