What is the difference between bad credit and no credit?

By Matt Lee AAA

The answer to this question will depend on what information (if any) is found on your credit report, such as any bankruptcy proceedings. If your credit is considered poor, then it could take a long time to rebuild your credit rating. If you have no credit because you've never taken out a loan and have no credit cards, then all you need to do is establish a good credit history by getting a small loan or credit card and paying off your debts before they are due and, if possible, in full.

So what do lenders use to gauge whether you are a credit risk? They look at your credit report. Credit reports, which are issued by credit bureaus such as TransUnion and Equifax (NYSE:EFX) are available for anyone who has any type of credit history, whether it's good or bad. Credit reports are used by credit granting companies to determine a borrower's credit risk, and are an essential component used to calculate your FICO score. (To learn more about credit scores, read Consumer Credit Report: What's On It.)

Essentially, credit reports are like financial report cards, showing both good and bad grades. There is detailed information regarding an individual's credit history, including how many credit accounts a person has (such as credit cards or personal loan accounts), the payment history in each account and any balance owing. If you have a bad credit history, then you will need to raise your credit score before you can get the most favorable terms on a new loan or line of credit.

There are many ways you can raise your FICO score and improve your credit report history. These include paying any payments that are in arrears, paying off some of your debts, or consolidating many of your smaller debts into one or two larger loans. Not only will these suggestions help you pay off your debts sooner, they will help repair some of the damage.

To read more about your credit history, read The Importance Of Your Credit Rating and How is my credit score calculated?


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  1. Credit Mix

    The types of accounts that make up a consumer’s credit report. ...
  2. Consumer Credit File

    A collection of data about an individual’s borrowing and repayment ...
  3. Negative Information

    Data in a consumer’s credit report that lowers his or her credit ...
  4. Cardholder Agreement

    A printed booklet a credit cardholder receives that contains ...
  5. Zero Liability Policy

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  6. Card Reader

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