No Credit History vs Bad Credit: What’s the Difference and How Do You Fix it?

Updated on September 25, 2023

Many people are unsure what the consequences are if they have bad credit or no credit. Is it the same thing?  Luckily there are simple answers and easy steps that can be followed to take no credit or bad credit and turn it into good credit.

No Credit vs Bad Credit

Bad credit is when you have or had a loan or credit, and you got a bad track record because of not paying the way you agreed you would. No credit means you have never taken out a loan or other credit from a lender and have no credit record. Let’s take a deeper look!

Bad Credit

Bad credit means you have a bad track record with lenders. Usually, this is due to defaulting on the loan agreement. Simply put, you didn’t pay when you said you would, and it may have developed into a pattern.

You get a bad credit record if:

  1. You pay late
  2. You don’t pay the agreed upon amount
  3. You don’t pay at all

No Credit History

No credit, on the other hand, means you don’t have a credit record at all. This is usually because you haven’t borrowed money or bought something from an official credit provider.

Many people think this is a good thing, but it can seriously count against you when you need to make bigger financial decisions by leveraging credit e.g. buying a car. When credit providers want to know if they can trust you, you need a credit record.

Do lenders or credit agencies distinguish between the two?

Whether you have no credit history or a bad credit history, both mean this: you don’t have a reliable credit history. This might cause difficulty if you want to take out a loan. Why? Because with both you are a risk, as lenders have no proof that you will actually pay.

If you have no credit, your credit score will also be zero. This is not the same as having a bad or “low” credit score. It simply means there is zero history to work with.

Is “no credit” better than “bad credit”?

Although both might cause you to struggle when you want to get a loan, having no history is always better than having a bad history. If you have no history, lenders don’t have proof that you don’t pay — they are just unsure whether you will pay. You still have a chance to easily built a great credit history!

So although both are a risk, bad credit will always look worse to lenders.

How to Fix Bad Credit

If you have bad credit, all hope is not lost. There are many routes you can choose to start rebuilding a good credit score, but your options will vary depending on your employment and legal status. Although normal institutions hesitate to give loans to immigrants, there are still options out there if you are not a citizen.

Get a Copy of Your Free Credit Report

You can get one free credit report from each of the three credit agencies every year. Learn more about each agency here:

You also have access to your free credit score through great online portals that help you manage or improve your personal finances. The best websites and tools include:

When you get your score, check out the details by doing the following:

  • Is the information correct?
  • Is there any debt that shouldn’t be there or an account that is outdated?
  • If there are any errors, make sure you get it fixed so your score is a true reflection of your credit history

Strategies to Reduce Debt

The first step to fighting back the strong arm of debt is to put a strategy down. Following a strategy keeps you disciplined so you can reduce your debt.

Try out the following steps when you put down your strategy:

  1. First of all, determine how much you can pay every month
  2. Take stock of all the debt you have and look at which carry the most interest
  3. Pay these off first, but don’t stop paying the others!
  4. Pay the minimum required amount on other debts and increase your payments on the heavy-interest debt
  5. If you get some extra cash – allocate some to lump sum savings and push the rest into your targeted debt
  6. Finally, break the bad cycle. Stop incurring extra deb.

Why make payments on time?

Making payments on time is the first, best, and the most important way to improve your credit score. If you had bad payment habits in the past, now is a great time to make a change!

Consider a Personal Loan to Consolidate Debt

This is where you take out one big loan to pay off all your other debt so that you only have to service one loan, one lender, and deal with one interest rate. Most banks offer consolidation loans and so does Stilt.

Taking a debt consolidation loan will leave a serious imprint on your credit record, but it will put in you the corner where you can’t help but pay off your debt.

Read more about consolidating and refinancing debt:

Is a Debt Consolidation Loan a Good Idea? Experts Explain the Good, the Bad, & the Ugly

Refinancing International Student Loans: The Ultimate Guide

Best Student Loan Refinancing and Consolidation 2018

4 Steps to Building Credit if You Don’t Have Any

There are four easy ways to build up your credit score.

1. Get a Secured Credit Card

A secured credit card is credit that is secured by a deposit you pay when you open the account.  Usually, your credit limit will be the same as the deposit you paid. This protects the lender from the risk of you not paying.

Most often, you will pay a monthly amount to show you honor your payment terms. As you continuously pay on time, your credit score will increase. Once your score is healthy, you can apply for a normal credit card, close the unsecured one and get your deposit back.

This isn’t the only option, however! Here are the 10 best credit cards for no credit history and some of our top credit card picks for students with no credit history.

2. Apply for a Credit-Builder Loan

Unlike normal loans, you don’t need a good credit score to apply for a credit builder loan. You just need enough income per month to make the necessary payments.

How do they work?

You won’t have access to the amount you borrow immediately. The borrowed amount is held by the bank while you pay your monthly installments. Your timely payments are reported to the credit agencies and your score is built up from bad to good. At the end of the loan period, you get the borrowed amount (plus interest) and hopefully a better credit score!

3. Create Good Habits

There are many habits you can cultivate to build a better credit score, but you start with these three:

  1. Make sure you pay the right amount
  2. Pay at the right time
  3. Use about 30% of your limit

4. Track Your Credit Score

As we mentioned above, you can get a free credit score. By tracking your credit score, you know where you are and how you can improve. This ensures progress and helps you to check there are no issues that break the momentum of your good track record.

Can you get a personal loan with no credit or bad credit?

It’s possible to get a personal loan when you have a bad credit score or no credit score. Let’s take a look at your chances with both of these.

Personal Loan with Bad Credit

Getting a personal loan when you have a bad credit score should always be approached with caution. Lenders who have an appetite for risk will generally have extremely high-interest rates or try to lock people in with terms that are difficult to meet.

To help you get started, here are a few of the best rated bad credit lenders:

1. Upstart

Upstart is a peer-to-peer marketplace for bad credit or no credit record individuals. It takes into account factors like your job and qualifications. There is especially a lot of focus on your education as part of the qualification criteria.

2. Lending Point

Lending Point is an online lending company. They focus on people who need to rebuild their credit score and use criteria like your debt-to-income ratio to determine whether you will qualify.

3. Avant

Avant is one of the largest online lenders and therefore cater for most needs. They offer quick turnarounds on loans, in some cases the next day, but it sometimes comes with high-interest rates.

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Personal Loan With No Credit

If you have no credit record, you might be able to qualify for a secured loan. In this way, no credit history is “better” than bad credit. In most cases, people who get loans get unsecured loans. Their loans are “secured” by their credit record. If you have no credit record, your loan can be secured by any assets, you own e.g. a house, car, a piece of land, or even someone co-signing for you.

If you don’t have a credit record, we suggest you take a look at these companies:

  1. Stilt

Stilt inspires trust because we understand how hard it can be to build a great credit score. We offer loans to those with little or no credit history (including international students) by considering factors like your merit, job prospects, and historical spending behavior.

Your education, income, and work experience will help you get you low-interest rates. Recent immigrants who do not have an SSN are still welcome to apply for a loan.

  1. Upstart

Like we mentioned, Upstart is a peer-to-peer marketplace for bad credit or no credit. Because of the focus on your job, and education, your chances of getting a loan with no credit history is much better.

  1. Bonsai Finances

At Bonsai, your loan will be personalized according to your profile and the amount, conditions and monthly repayment terms you can commit to.

  1. SoFi

SoFi considers education and work experience as some of the main factors to approve loans. They also help you by putting your loan on hold if you lose your job.


Whether you have no credit or bad credit and whether you are a citizen or not, it is possible for you to reach a good credit score (and reap all of the benefits of a good credit score) to ultimately get a great loan. Set yourself some goals to achieve a great credit score and then follow through by honoring your loan agreements. Remember, a better credit score = better lending rates and access to better credit products.

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Frank Gogol

I’m a firm believer that information is the key to financial freedom. On the Stilt Blog, I write about the complex topics — like finance, immigration, and technology — to help immigrants make the most of their lives in the U.S. Our content and brand have been featured in Forbes, TechCrunch, VentureBeat, and more.