Is No Credit Better Than Bad Credit?

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Having no credit or bad credit both present different challenges. Bad credit can prompt frequent collection calls and take a long time to repair, while no credit can reduce your eligibility for most loans.

Whether you’re new to credit or you have years of activity (and a few blemishes on your report), you may wonder, “Is no credit better than bad credit?” No credit and bad credit can both hold you back in their own ways. No credit means that lenders can’t easily review your credit history, while bad credit means you’ve earned derogatory marks on your credit profile.

We’ll explore the nuances of both situations and share ways you can bolster your credit.

Key Takeaways

  • Everyone starts with no credit until we take an action that must be reported to a credit bureau.
  • It takes time to increase your credit, whether you have bad or no credit.
  • There are certain loans that you can apply for with bad credit.

What Are the Impacts of Each?

Credit scores, alongside a person’s employment status and annual income, help lenders decide if they’ll approve an applicant for loans, credit cards, and low interest rates. Borrowers with no or bad credit can still secure loans despite their current credit status, but it helps to know how their prospects might be affected.

The Impact of No Credit

People start to build credit when they make financial decisions that can be reported to a credit bureau. Applying for a credit card, paying down a student loan, or paying rent for a property you’ve leased are just a few actions that would fall under this umbrella. 

Lenders may have a harder time getting a sense of a no-credit borrower’s credit risk since the borrower won’t have a credit report. Some effects of having no credit score include:

  • Ineligibility for most loans: It’s still possible to acquire bad credit loans, but it’s generally much harder to gain substantial funding with no credit history.
  • Reduced credit card options: Borrowers with no credit history may only be eligible for cards with low limits or higher interest rates.
  • Renting restrictions: Landlords often ask that renters meet or exceed a specific credit score range.

The effects of bad credit

A person’s credit score can fall for multiple reasons. While certain actions, like applying for new credit cards, can temporarily cause one’s score to dip, long-term financial habits determine credit scores the most. 

Consistently making late payments, exceeding your credit limit, and neglecting your oldest accounts can lead to a bad credit score. Bad credit can present some of the same challenges that no credit can, as well as unique hurdles, including: 

  • Collection agencies: If you owe a significant amount of debt, a collection agency may repeatedly call and ask you to pay your outstanding debt. Knowing your debt collection rights can help if an agency threatens to seize your assets or ask for more money than you owe.
  • Credit limit decreases: A bank can reduce a borrower’s credit limit if their score drastically decreases. These terms are usually outlined in the cardholder agreement you sign when first acquiring a credit card. 
  • Stress: Bad credit can decrease morale and raise stress by making it much harder to secure loans and decrease your interest rates. Depending on the severity of your debt, improving your credit can take a long time.

5 Ways to Build Credit

Whether you have bad credit or no credit history whatsoever, you have the power to improve your scores—and your financial opportunities as a result. The following five recommendations can bolster your credit over time. 

Make Payments on Time

Payment history influences 35% of your FICO® credit score, which is the model most lenders rely on. Consistent, on-time payments will demonstrate financial responsibility and gradually raise your credit.

Limit Applications for New Credit

Each time you apply for new credit cards or loans, your profile receives a hard inquiry that temporarily lowers your score. Applying for too much credit all at once can significantly hurt your score.

Regularly Check Your Credit Report

Reviewing your credit report grants you insight into your financial habits, as well as errors or inconsistencies. offers a free credit report card that reviews your financial habits in five categories, including the number of inquiries on your account and the diversity of your credit mix.

Apply for a Credit Builder Loan

A credit builder loan helps no- or poor-credit borrowers improve their credit by paying down a small amount of debt. These loans usually cap out at $1,000 and have 6- to 24-month repayment terms. Check if a loan’s interest rate or repayment terms will fit within your budget before you sign any agreements.

Maintain Your Oldest Accounts

Keeping your oldest credit card accounts open will typically benefit your credit, even if you don’t use them anymore. This is because your oldest accounts help boost your credit age, and they can also help you keep your credit utilization ratio lower, both of which have a positive effect on your overall credit health.

How to Find Credit Cards for Bad Credit

With a bit of effort and the right know-how, you’ll find multiple avenues to get credit cards for bad credit. Signing up for a credit monitoring service is a great first step. You’ll get strategies for handling debt and recommendations for credit cards and loans based on your current circumstances. 

Many commercial banks offer at least one credit card for low-credit applicants. These cards often have low credit limits and may not have premium features like cashback or reward points. Nevertheless, responsibly using and paying down these cards will help display your creditworthiness over time. 

The best credit cards and loan options become available with a higher credit score. As you take positive steps to build your credit, you’ll be eligible for more favorable offers—which can further enhance your credit profile. Resources like can help you better understand your overall credit profile.  

Work on Your Credit With

Challenges are par for the course on any person’s credit journey, whether they have excellent credit or no credit history whatsoever.’s free credit report card can help you navigate those challenges by reviewing your credit age, payment history, and account mix—then offer advice that you can implement when managing your credit.

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