No Credit vs. Bad Credit Which is more harmful?

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Credit: No Credit vs. Bad Credit Which is the more damaging?
Credit is not a sign that you don't have any credit score. Bad credit means you do and probably made mistakes.
By Lindsay Konsko
, Bev O'Shea personal finance writer | MSN Money, Credit.com, Atlanta Journal-Constitution, Orlando Sentinel Bev O'Shea is a former NerdWallet authority on consumer credit, scams and identity theft. She holds a bachelor's degree in journalism from Auburn University and a master's in education from Georgia State University. Before joining NerdWallet she was employed by newspaper publishers, including daily ones, MSN Money and Credit.com. Her work has been featured in The New York Times, The Washington Post, the Los Angeles Times, MarketWatch, USA Today, MSN Money and other publications. Twitter: @BeverlyOShea.




as well as Lauren Schwahn Lead Writer | Personal finances and Lauren Schwahn Lead Writer debt Lauren Schwahn is a writer at NerdWallet who writes about budgeting, debt and money-saving strategies. She is a contributor to the "Millennial Money" column for The Associated Press. The work she has contributed to was featured by USA Today, MarketWatch and many more. Lauren has a bachelor's degree in history from The University of California, Santa Cruz. Her home is within San Francisco.





Feb 2nd 2023


Edited by Kathy Hinson Lead Assigning Editor Personal finances, credit scoring financial management and debt Kathy Hinson leads the core personal finance team at NerdWallet. Prior to joining NerdWallet, she worked for 18 years working at The Oregonian in Portland in roles including copy desk chief and team editor and designer. Previous experience included news and copy editing for many Southern California newspapers, including the Los Angeles Times. She graduated with a bachelor's in mass communications and journalism in The University of Iowa.







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If you don't have credit, this means that creditors don't have a good method of predicting how likely you will pay off your debts as agreed.
It's not the same as bad credit, meaning that you have a credit history with major imperfections.
No credit vs. bad credit Which is the better choice?
Even if you earn an income that is reliable, but have no credit history, you will be considered to be a bit of a risk due to the fact that you do not have a track record. In the event of a credit deficit, it can result in:
Finding a suitable place to live.
Paying higher utilities deposits.
There are fewer options for emergencies.
A higher interest rate (or getting rejected) when you plan to obtain an loan.

A -- which is often described as a score less than 630 on a scale of 300-850 -- makes lenders reluctant to extend credit because you've made some major credit-related mistakes previously.
Examples of possible examples include:
Late payment.
If you use more than 30% of your credit limit.
Allowing an account to go to collections.
A past bankruptcy.

If you have either no credit or have bad credit, it's a good idea to focus on improving it. What you do to improve your credit is different for each situation.
Know how your credit is assessed
Find your free score and the factors that impact it, plus tips on how to keep building.










5 ways to turn no credit into credit that is good
If you don't have a financial score at all, good reason is that you're beginning with an entirely new slate. Your best options to start working towards credit are:
. These cards, as their names suggest, are backed by the security deposit.
. These cards are fairly easy to qualify for in the event that you do not have credit.
can also help you establish credit and do not require cash outright as secured cards do.
Authorized user status. The status of being an authorized user for the credit card of someone else and with an outstanding payment history could aid in getting you on the map of credit. You're not accountable for payments, though, and its effect is limited.
Co-signing a loan with a co-signer. It's dangerous for the co-signer because he or she is entirely responsible for repaying the loan. Failure to pay back on your part can hurt the credit of the co-signer, and even end your relationship.

If you are starting with bad credit
If you're in the middle of a credit crisis, you have a different problem with a similar solution.
Instead of trying to build credit instead, you are trying to .
In contrast to people who have no credit, you'll be able to get your credit report. And it's a good idea to learn what it states. Here's what to do:
to receive a copies of your credit reports from all 3 major credit report agencies. You are currently allowed to receive one report per week, from each agency until the end of 2023.
Check your reports for mistakes, especially for addresses where you've never resided, accounts that you don't recognize , or payment amounts that appear to be odd.
It's possible, but you'll need to complete it to each of the credit agencies, however it's well worth the time and effort. Incorrect information can significantly damage your scores.

Most mistakes with credit disappear from your credit report in about seven years. However, you can use some of the strategies to establish credit, specifically credit-builder loans or secured credit cards to aid in reestablishing yourself. Recent positive information about your payments can assist in resolving mistakes in your previous.


The authors' bios: Lindsay Konsko is a former staff writer covering credit cards and consumer credit for NerdWallet.


Bev O'Shea was a former credit writer at NerdWallet. Her work was published in the New York Times, Washington Post, MarketWatch and elsewhere.


Lauren Schwahn covers consumer credit and debt at NerdWallet. Her writing has also been highlighted by USA Today and The Associated Press.







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