No Credit vs. Bad Credit

Based on an individual’s history when it comes to repaying credit, they are given a personal credit score. It is a calculated three-digit value depicting how much debt a person carries over a certain period. This credit score helps lenders determine the likelihood of a creditor repaying on time when issued with a loan or a credit card. A good credit score is not just important for securing credit, it also shows your credit history with lending entities. Understanding no credit vs. bad credit helps in making informed credit decisions. Both situations carry risk, but by understanding the difference, a consumer is able to know the risks and make informed credit decisions.

No Credit vs. Bad Credit. What’s the difference?

There are clear and precise differences when it comes to bad credit vs. no credit. Having no credit is a situation where there is no data on an individual’s credit report. This means the individual has not taken on any credit in the past, usually the last seven years. A good example would be a student who hasn’t taken on any student loans or debts. On the other hand bad credit means that an individual’s has a credit report showing their credit score is low, typically 300-629 on the FICO score chart, and their credit report reflects late payments and defaulted loans. Examples of bad credit situations include; exceeding 30% of your credit limit, making late payments, history of bankruptcy and when an individual’s account goes to collections. No credit vs. bad credit: which is worse? No credit is considered easier to deal with compared to bad credit. It is easier to get rid of no credit than fix bad credit. A person with no credit could experience better interest rates and higher approvals than one with bad credit.

Meaning of No Credit and Bad Credit

No credit and bad credit can make it difficult for credit and lending companies to approve your applications. It is thus necessary to understand bad credit vs. no credit score. Although it is uncommon to have no credit, it is often seen with people who do not believe in borrowing. When you have no credit, lenders and creditors have a hard time evaluating your likelihood to pay, however it is easy to fix no credit. This is usually solved by taking credit to build your credit report. Bad credit is seen when an individual’s report shows they have defaulted or made late payments leading to a low credit score. Fixing a bad credit score is harder and takes more time. Hence it is better to have no credit than have bad credit.

Ways of turning both to good credit

Turning no credit to good credit is easier since you are starting without any prior bad history. First, one has to take credit in order to start developing a credit report. This could take between three to six months to build. The best options for quickly turning no credit to good credit would be; getting a secured credit card that comes with a security deposit, becoming an authorized user on the credit card of someone with good credit history, applying for college student credit cards, getting a co-signer with good credit history to share your liability for a credit card or loan on your first account and taking credit builder loans that usually do not require security.

In the case of bad credit, there is already an existing credit report. This report typically has a low credit score and one has to rebuild their credit history to make it appealing to creditors and lenders. Knowing what your current credit report says is a good place to start as incorrect credit information can give you low credit scores. Check your credit report for errors and in case of any file a dispute with the appropriate credit reporting agency accompanied by a copy of the credit report. Rebuilding credit scores after bad credit can take time. First, you would have to get current on your delayed payments. It is advisable to leave those debts in collections until you are up to date on your payments. Next is to work on lowering your credit ratio by reducing the amount you owe. These will slowly raise your credit score.


It is easier to solve no credit compared to bad credit. People with no credit find it easier to get approval by credit companies compared to those with bad credit reports. They enjoy lower interest rates compared to people with bad credit. It is advisable for someone with intent to take on huge credit responsibilities to avoid both these situations as they are risky and not appealing to lenders and creditors.

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