Bad Credit vs. No Credit: What’s the Difference and Which Is Worse?

45 million Americans have no credit scores. Plus, one-third of Americans have bad credit. In other words, almost half of all Americans have no credit or bad credit.

Are you one of these millions of people?

Read on to learn what this means and what options are available to help you build your credit.

Check out for more on how to improve your credit score.

What is Bad Credit?

Bad credit typically refers to a credit score below 630 on a scale from 300-850.

People who have a bad credit rating have made big credit mistakes in the past. This has lowered their score. Each infraction lowers a person’s score by a little bit. Serious infractions lower the score by a lot.

The kinds of things that lower your credit score are late payments on your bills and credit cards and using more than 30% of your credit limit.

If you have previously filed for bankruptcy or had an account go to collections because of non-payment, you likely have a low credit score.

What is No Credit?

No credit means that you have no credit history. You haven’t ever had a credit card or a bill in your name.

Young adults often find themselves in this boat when they first move out on their own or begin to be more independent. Newcomers to the country also face this challenge.

Without a credit history, you may have trouble getting a loan and finding a place to rent. Or you may need to pay larger utility deposits.

You’ll also have fewer options if you need emergency funds.

Is No Credit Better than Bad Credit?

Creditors are wary of people with no credit because they don’t know if they will pay their bills or not. Even if you have a good employment track record, you are still considered a risk to creditors.

Whether you have bad credit or no credit, either way, you don’t have good credit. And good credit makes it easier to secure a loan, get approved for a mortgage and so on.

But, if you have no credit, you haven’t made financial mistakes. This means that you can start building your credit history.

A secured credit card or student credit card is a great way to start building your credit. These are often the easiest credit cards to qualify for. And they allow you to get started with building your credit.

You can also look into credit-builder loans. These don’t require you to put any cash down the way that secured credit cards do.

Final Thoughts

Thanks for reading. We hope this post has helped you understand the difference between no credit and bad credit.

No matter which type of credit you currently have, you can implement good financial habits now.

Set up automatic bill payments so you are never late. Pay down your debt so that you owe less than 30% of your credit card max. Then, over time you will see your credit score start to climb.

Next, read these 10 ways that online loans make borrowing money easier than ever.