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!
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.
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.
Use a credit card responsibly
Apply for a student loan
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.
No credit means, you haven't had any credit activity that credit bureaus can use to generate a credit score for you.
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.
To build a good credit history in the USA, you should:
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