There is a difference between having bad credit and having no credit. Unfortunately, they may have similar effects when it comes to applying for loans or qualifying for credit cards. While it may be easier to achieve a good credit status from no credit, the road back from bad credit will present additional obstacles.

Bad credit has a number of sources. If you habitually make late payments, have maxed out your credit lines, declared bankruptcy, or have had a home fall into foreclosure, then your credit will be negatively affected. Bad credit is the result of credit history and how you are rated by the top three national credit reporting agencies.

No credit is the result of having no credit history. Getting approved for loans may be difficult without a credit history because lenders have no idea how much risk you might incur. Without a history, lenders have no discernible way to determine how a debtor would manage debt and therefore may not approve a loan.

In either situation, the best way to start building a credit history or recover from bad credit is through a secured credit card or becoming an authorized user on another person’s account. Using credit and paying it off on time helps people with no credit build good credit history, much as it does someone with bad credit.

Contact us at Choice Lending Services to learn more about how credit affects you.