The main differences between bad credit and no credit are access and cost. It’s easier to get a credit card, loan, apartment rental, car lease and more with no credit history than it is with a bad credit score. And people with no credit tend to get more favorable terms – rates, fees, rewards, etc. – when borrowing than those with bad credit.
Before going into more details about what it’s like to have bad credit vs. no credit, it’s first important to understand what each term means. Credit scores are divided into tiers, ranging from “bad” to “excellent.” People with credit scores from 300 to the mid-600s are generally thought to have bad credit. It’s difficult to be more specific because lenders have the final say on credit categories. People with no credit, on the other hand, are unlikely to even have a credit score. The label means you don’t have experience with your own loan or line of credit, at least not recently.
The easiest way to find out which credit category you fit into is to check your latest credit score for free on WalletHub. You’ll also get a personalized credit analysis, breaking down what you need to do to improve and how long that will take.
Although bad credit is more costly and difficult to deal with, neither bad credit nor no credit is a life sentence, fortunately. There are a number of ways to build or rebuild your credit, as the case may be. Still, there are plenty of differences between the two credit categories. And the table below showcases the most important ones.
Bad Credit vs No Credit
*Stats in this table are subject to change over time. But the difference between having no credit and bad credit should stay fairly consistent.
Which is worse? Bad credit by a big margin. It’s usually much easier to build good credit from scratch than it is to repair bad credit. And creditors are more likely to trust someone with a blank slate than someone with a history of making mistakes.
Whether you’re building or rebuilding your credit, the best approach is to use a credit card responsibly, even if that means placing a refundable security deposit on a secured card. First and foremost, responsible use means always paying your monthly bills on time. If you don’t trust yourself to do that, or to spend within reason, just get a credit card and don’t use it. Simply having an open account will improve your credit standing.
For more tips, check out WalletHub’s credit improvement guide.