No Credit vs Bad Credit and What You Can Do About It

Team Bond
Date Published
January 27, 2022
Read Time

When it comes to credit, a question that’s often asked is, which is better: no credit or bad credit. Both have their own set of pros and cons, and each can have a significant impact on your financial future. In this article, we'll take a closer look at the differences between no credit and bad credit, and look at an option available to those who want to improve their credit.

What does it mean to have no credit or bad credit?

First, let's define what we mean by "no credit" and "bad credit." No credit refers to individuals who have never had a credit account or loan, and therefore have no credit history. This can be common among young adults just starting out in the financial world, or for those who have always paid for things in cash and never needed to borrow money. Bad credit, on the other hand, refers to individuals who have a history of late payments, defaults, or other negative credit events. This can happen to anyone, but is often the result of unexpected financial hardships or poor money management.

What are the advantages and disadvantages?

Some might consider not having any negative marks on your credit report an advantage. This means that lenders and creditors won't see any red flags when they look at your credit history, and you'll be more likely to be approved for loans and credit cards. Additionally, if you're just starting out in the financial world, having no credit can be a great opportunity to build a positive credit history from scratch.

However, having no credit can also be a disadvantage. Without a credit history, lenders and creditors won't have any way to determine your creditworthiness, and you may be denied loans and credit cards, or be offered less favorable terms. Additionally, if you're looking to buy a home or a car, having no credit can make it more difficult to secure a mortgage or car loan.

On the other hand, bad credit is almost always a significant disadvantage, as it can make it more difficult to secure loans and credit cards, and can lead to higher interest rates and fees. Additionally, bad credit can also make it more difficult to rent an apartment, or get approved for a job, as some landlords and employers check credit reports as part of their screening process.

How do you fix no credit or bad credit?

The good news is, bad credit is not necessarily a permanent condition. With time and effort, it's possible to improve your credit score and turn your financial situation around. This can involve paying off outstanding debts, making payments on time, and working with a credit counselor to develop a plan to improve your credit.

Experian and US Census data indicates that over 150 million individuals in the US are considered financially at risk today and according to Roy Ng, CEO and Co-Founder of Bond,

"Many people with bad or no credit are “unaware of options that are available to them besides a simple debit card.”

There's a better option than a debit card for improving credit

Recently, it has been quite common to see companies focused on helping people who are trying to build or repair their credit, through the use of a very useful financial product commonly known as a credit builder card. While debit cards shield users from falling further into debt, they do virtually nothing to help a user improve their credit.

Companies like TeamUp and FloatMe offer credit builder cards to their customers and report the  payment history to the credit bureaus thereby contributing to the establishment of a positive credit history. These credit builder cards shield the users from falling into debt due to overspending - one of the main causes of bad credit.

Wrapping it up

In conclusion, both no credit and bad credit are not positions you want to find yourself in although millions of Americans currently do. Fortunately, with time, effort and help from products like credit builder cards, it's possible to improve your credit score and turn your financial situation around.Ultimately it's better to have a good credit score as it will open up more opportunities for you in the future.