No Credit vs. Bad Credit

Learn what each concept means and how responsible credit use can help navigate the path toward building better credit


Whether you’re a young adult branching out on your own or you’ve been managing your finances for years, it’s important to know where your credit stands. Things like your credit history, credit report and credit score may affect whether you’re approved for an auto loan, a mortgage or a new credit card. 

But what if you haven’t established any credit yet? Or your score isn’t quite as high as you’d like? Knowing the differences between bad credit and no credit may help you assess your situation. From there, you can make strides toward a brighter financial future.

What Is a Credit Score?

A credit score is a measure of how likely you are to pay back a loan on time. It gives lenders a general idea of how financially responsible you are. Your score is derived from a variety of factors, including payment history, unpaid debt, length of credit history, types of credit and new credit applications.

Equifax, TransUnion and Experian are the three major national credit reporting agencies. Generally, credit scores range from 300 to 850 points. But each credit reporting agency uses different scoring criteria, so having multiple scores is normal. 

What Does It Mean to Have No Credit?

Some people may find they don’t have a credit score. Without a credit history, there’s nothing for the reporting agencies to assess.

It’s a common issue known as credit invisibility—and it affects 26 million adults in the U.S., according to the Consumer Financial Protection Bureau (CFPB). There are an additional 19 million adults who have insufficient or dated credit histories that are deemed unscorable by credit reporting agencies.

What Does It Mean to Have Bad Credit?

Lower credit scores, or bad credit, may be the result of a number of factors. Things like repeatedly missing payments, using too much of your credit or defaulting on debts may negatively impact your score.

About 12% of adults in the United States have a FICO® credit score of 550 or lower, according to Experian credit data. But no matter where your score stands, with a bit of patience and discipline, getting back on track is possible. 

Bad credit can be frustrating, especially for people who don’t know how they got there. But there are ways to learn what’s impacting your score—and what potential lenders are seeing.

How Can I Check My Credit Score?

Before making assumptions on where your credit stands, consider checking your score. You can do this for free with CreditWise® from Capital One®—a free tool that provides a personalized summary of key factors that may affect your VantageScore® 3.0 credit score, provided by TransUnion®.

Free credit reports are also available from each major credit reporting agency once per year. You can obtain yours at AnnualCreditReport.com

Evaluating the details of a credit report can help provide clarity about lower scores. With credit details and account information all in one place, it may be easier to see what’s causing the biggest impact. 

Regularly checking your credit report for mistakes or errors is a great habit to form. And if there are any errors, dispute them. Keeping an eye on the information in your reports can also be a way to monitor for possible identity theft.

What Are Ways to Build or Establish Credit?

Building and establishing credit may take some time. But implementing good credit habits can make getting on the right track feel easier. Some practices for improving your credit include:

  • Using a credit card responsibly: A credit card is one way to start building a credit history. Use it responsibly and pay your monthly bills on time. 
  • Staying under your limits: Some credit-scoring formulas account for how often you “max out” your card. Avoid hitting the maximum credit limit on a credit card. And be aware of how much of your available credit you use.

So Is No Credit Better Than Bad Credit?

Having no credit and having bad credit can both come with challenges. So you may want to consider ways to start establishing and building a good credit history. 

Simply staying informed about your credit is one step in the right direction. And if you can take additional steps to build your credit, you may look more trustworthy to potential lenders. With a strong credit score and history, you may increase your chances of being approved for a mortgage, a car loan or a new credit card.


We hope that you found this helpful. Our content is not intended to provide legal, investment, or financial advice or to indicate the Capital One product or service is available or right for you. For specific advice about your unique circumstances, consider talking with a qualified professional.

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