No Credit vs. Bad Credit: They’re Not the Same!

by Su Hsiang Yu | In Financial Empowerment, MPOWER VIP | 1 July 2019

No Credit ≠ Bad Credit

There’s only one similarity between bad credit and no credit – that you get them both as a result of not having good credit. Apart from that, they have nothing in common.

If you are not a U.S. citizen, you might never think of building your credit score, but if you’re living in the U.S. then credit means a lot – in fact, having no credit or too little credit can make you less attractive to lenders or even future employers. Moreover, having bad credit might signal that you once were approved for loans or credit cards but you’ve made a few missteps, such as paying late, not paying the agreed amount, or not paying at all. So, what does “Credit” actually mean in the financial world? Read on!

What does “Credit” mean?

First of all, we need to clarify what “credit” actually means in this context. It’s not a credit card, not a debit card, either. Credit refers to a contractual agreement in which a borrower can purchase goods or services now and agree to repay the lender at a later date — generally with interest. After understanding this, we can, therefore, clarify what good/bad credit means in this context. 

Good/bad credit is a classification for an individual’s credit history. Normally, the credit classification can be broken into 5 tiers: exceptional, very good, good, fair and poor. Borrowers with a good credit score could be in any one of the top 3 categories, otherwise, it falls into a bad credit score. Normally, the credit score can range from 300 to 850. 

  • If you have a score ranging from 800 or higher, it’s exceptional. 
  • If you have a score ranging from 740 to 799, it’s very good.
  • If you have a score ranging from 670 to 739, it’s good.
  • If you have a score ranging lower than 670, it’s referred to bad credit.

Which is better when planning to stay in the U.S.?

Neither is good, actually. 

But as a general rule, having bad credit is worse than not having any credit. If you have no credit, you can start from the ground up. And both of them make it difficult to apply for a loan or even an apartment or car lease.

How to build credit from scratch?

Use a credit card responsibly

  • Credit cards are mostly available for non-resident aliens. Therefore, if you are qualified to apply for a credit card, do it. From there, you can use the credit card to pay bills or subscriptions and of course buy regular things like food, clothes, etc. Definitely remember to pay your credit card bill on time and in full, which can help demonstrate that you’re a reliable borrower.

Apply for a student loan

  • Non-resident aliens can sometimes have a tough time getting student loans, and it’s even harder if they don’t have a U.S. credit score. However, some companies do provide loans. By paying for student loans, borrowers can establish and build credit. Once you accumulate a good payment history, such as paying the bill off in full each month on time and staying below your credit limit, you can create a documented paper trail of your excellent credit history. With that in hand, you can prove to lenders or landlords that you are trustworthy and reliable and can manage your loan and money well.


To sum up, no credit does not mean bad credit, but both aren’t good. Don’t be worried about not having credit when you first arrive in the U.S. as an international student. Start building it and manage it with caution, so you can have an excellent credit score over time.


[sc_fs_multi_faq headline-0=”h4″ question-0=”What is your credit score if you have no credit?” answer-0=”No credit means, you haven’t had any credit activity that credit bureaus can use to generate a credit score for you.” image-0=”” headline-1=”h4″ question-1=”Is it worse to have bad credit or no credit?” answer-1=”No credit equals no credit score, but bad credit means, you have a credit score and you’ve made some defaults. It’s harder to have a good credit score after you default but you can build a good credit score from no credit.” image-1=”” headline-2=”h4″ question-2=”How can I build credit with no credit history?” answer-2=”To build a good credit history in the USA, you should:<br><ul><li>Apply for a student loan</li><li>Use your credit card responsibly</li></ul>” image-2=”” count=”3″ html=”true” css_class=””]


Author: View all post by Su Hsiang Yu

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