 TITLE: Why No Credit Is Better Than Bad Credit CONTENT: What's the Difference Between No Credit and Bad Credit?\n-------------------------------------------------------\nHaving no credit means you've never taken out a loan or credit card and thus don't have a consumer credit report. When you borrow money from a financial institution or get a credit card, your credit history will begin. The company will provide your account activity to at least one of the three major credit reporting agencies (Experian, TransUnion and Equifax), which will then create a credit report in your name.\nThe information on your credit report will depend on what type of credit you have. Loans will show the original amount you borrowed, while credit card accounts will show the available limit and balance. For both loans and credit cards, you'll see the date you applied, the date credit was granted, and your monthly payment pattern. A credit scoring company such as FICO will then take the data from your credit report, put it into a mathematical model designed to predict credit risk, and transform it into a numerical score, typically from 300 to 850.\nWithout a traceable credit history or credit score, a lender has no way of knowing what kind of credit risk you present. While you may not have proven yourself to be irresponsible, you haven't demonstrated that you're responsible either. You're an unknown quantity to lenders.\nBad credit is the opposite. It's a verifiable indication that something went wrong in your credit history. It could be evidence that you paid your bills late or acquired a large amount of debt relative to the amount available. Maybe you defaulted on accounts and are experiencing collection activity, or have filed for bankruptcy. Negative information on your credit report will be calculated into your credit scores, causing them to drop.\nTo turn no credit into great credit, you'll just need to populate your credit report with positive information. To recover from bad credit, however, you'll need to make positive changes that can help you improve your credit over time. END