Posted by Daniel P Vigilante CPA and Profit Consultants

No Credit vs. Bad Credit: Understanding What Each Entails

No Credit vs. Bad Credit: Understanding What Each Entails

Credit is one of the issues that bother consumers a lot. One day you have your credit score rating as "good," and months later, you dropped. You tried and tried to pinpoint what could trigger it, but you got nothing.  

You have been diligent with paying your bills. You might have exceeded the minimum payment on your credit card. However, you closed one of the lines of credit, and your credit score still took a hit. This establishes the fact that credit score is something many people find difficult to wrap their heads around. To worsen matters, getting into debt does not help your credit score.

How is the Credit Score Composed?

Before exploring the difference between having bad credit and no credit, we need to understand a credit score's constituent. Your credit score can be reported using any of these two methods: Vantage point and FICO.

We have three principal credit reporting bureaus: Equifax, Experian, and TransUnion. They all use VantageScore to report their scores.

This is the criteria for the credit rating based on FICO and VantageScore.

FICO Score:

  • Types of credit accounts (10%)

  • Credit inquiries (10%)

  • Age of credit history (15%)

  • Level of debt (30%)

  • Payment history (35%)


  • Available credit (3%)

  • Credit behavior and inquiries (5%)

  • Total debt (11%)

  • Credit usage (20%)

  • Age and type of credit (21%)

  • Payment history (40%)

As evident from the above, both credit score ratings use credit age and debt to determine the credit score. You might, however, want to know which is important. Besides, it is vital to understand how to establish your credit score without an existing credit line.

There is, however, not a simple way to determine how to establish your credit score. Besides the bad effect of debt and credit age, the pair can also significantly impact your finances. This will not present you in a good light when people run a credit check on your account.

Without a credit history, for example, landlords might not be keen on renting out an apartment to you. With bad credit as well, getting approval for a new line of credit will not come easy.

Based on the rates we have above, FICO scores prioritize debt level while VantageScores prioritizes credit age. This does not mean one is more important than the other. Both matters, and with the proper plan, you can recover from any situation with the right strategy.  

The following steps can provide a good starting point.

To build your credit age.

  • Consider going for a credit-builder loan.

  • Request for a co-signer for a loan

  • Consider starting with a student credit card or a secured credit card.

  • If your parent has an impressive payment history, consider being an authorized user on their credit card account.

To recover from bad credit…

  • Check your credit report for errors and dispute any if you find it.

  • Set up an automated payment plan for your bills to stay on top of monthly bills

  • To pay your debt, reduce how you use your credit card.

  • Consider consolidating your credit card debt for easy payments.


Make sure to prioritize improving your credit score if you have either bad credit history or adverse credit history. With the points discussed in this article, you can repair your credit without stress.

Daniel P Vigilante CPA and Profit Consultants
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