How do I know if I have bad credit?

Yes. No credit is better than bad credit because it is easier to turn no credit into good credit. With no credit, you will also have better credit card options, and it won’t cost you as much overall. Bad credit will make it much harder and more expensive to get a mortgage, auto loan, personal loan or credit card. It could also complicate finding a job or place to live.... read full answer

You can see where, exactly, your credit score falls on the 300-850 scale by checking it for free on WalletHub – if you have a score, that is. If you have absolutely no credit history, you won’t have a credit score because there’s nothing to base one on. But you can get your first credit score within a month of opening your first credit card.

Below, you can learn more about what no credit and bad credit mean, how they compare, and what you can do to improve on either rating.

What “No Credit” Means:

No credit means you have no credit history, or experience as a borrower – not that you have no shot at getting credit. Lenders must be somewhat cautious with unproven applicants, but people starting with a clean slate are at least as likely to manage credit responsibly as they are to abuse the privilege. So, when you have no credit, lenders are more likely to consider your potential than someone with bad credit.

For example, college students are able to get very attractive credit cards despite not having much, if any, credit history because they have high earning potential and lots of financial needs ahead of them, which could make the banks and credit unions offering the cards a lot of money in the long run. And other people with no credit can get a credit card to begin building credit without placing a security deposit.

What “Bad Credit” Means:

Bad credit means you’ve made mistakes as a borrower or otherwise failed to satisfy certain payment obligations. For example, bad credit could be the result of bankruptcy, foreclosure, repossession, defaulting on a loan or line of credit, collections accounts and more.

There’s less guesswork for creditors when it comes to people with a track record of misusing credit because past performance is the best indicator of future results, and they already have some evidence of what kind of borrower you’ll be. You just need to prove them wrong.

Next Steps for People With Bad Credit & No Credit:

Whether you have bad credit or no credit, the solution is pretty much the same. You must add positive information to your major credit reports on a regular basis, to either cover up past mistakes or build out a thin credit file. And that means you need to get a credit card and use it responsibly. All major credit cards report account information to the credit bureaus monthly, and that information will help your score if it shows you’ve paid your bill on time. You don’t even need to make purchases with your card to benefit.

Of course, the credit card options are a bit different for people with bad credit and no credit, respectively. A secured credit card is your best option if you have bad credit, while you should be able to get a decent unsecured starter card if you have no credit.

You learn more from WalletHub’s new to credit and bad credit score guides, but we’ll summarize the biggest differences between these credit categories below.

Compare Bad Credit vs. No Credit:

Whether you have bad credit or no credit, you need a credit card to begin (re)building your standing. And you can’t go wrong with one of WalletHub’s editors’ picks for the best starter credit cards or the best credit cards for bad credit.