Is No Credit Better Than Having Bad Credit?

Mark Twain is quoted as having once said, “It is better to keep your mouth closed and let people think you are a fool than to open it and remove all doubt.” Similarly, while having no credit is somewhat better than having bad credit, having no credit can inhibit your ability to qualify for a loan just the same.

How?

Read on.

 Bad Credit

Lenders go to one (or more) of the big three credit reporting agencies to review your record of living up to your word when you submit a credit application. They’ll look to see how much debt you currently have, your history of on-time payments, how much of your available credit is currently in use, how long you’ve had credit accounts and what types of accounts you’ve managed.

In most cases, bad credit is the result of high credit usage and late payments. However, a young credit history can work against you as well.  As these Freedom Debt Relief reviews will substantiate, a bad credit history can really make it difficult to get things done in the modern world.

Beyond qualifying for loans, an unfavorable credit history can knock you out of the running for certain types of jobs, get you denied for apartments and cause insurers to deny you coverage.

 No Credit

The good news about having no credit history is there’s nothing negative about you out there. However, there’s nothing positive about you out there either. When viewed from the perspective of the lender, extending credit and gambling have a lot in common. Every approved loan application is a bet the person behind that application will follow through.

Your credit history is basically the equivalent of the Daily Racing Form. Lenders consult it to measure your past performances to try to predict your future behavior. With nothing on which to go, they’re just as likely to deny your loan application. The good news is modern life will invariably result in you having some sort of a payment history a lender can dig up, whether it’s your utility bill or your telephone.

Still though, you’re going to have trouble getting a car loan or a mortgage from a reputable lender with no credit history at all. Yes, there’s always someone out there willing to take a chance on you. However, they’ll stick it to you real good when it comes to the high interest they charge.

 Building a Credit History

While a lot of debt experts revile credit as the spawn of Satan, the fact of the matter is you’re going to need credit to make it in today’s society — unless of course you’re heir to an incredible fortune and can pay cash for anything you might ever desire. 

Otherwise, you’ll be looking at making huge cash deposits to self-insure your car, which you bought with cash; as well as your home, which you also bought with cash — see where this is going?

Bottom line, there are things you're going to need that will be out of reach unless you employ credit to acquire them. Oh, by the way, many successful businesses have started using credit to acquire seed capital. In fact, that’s the best possible use of credit — engaging it to do something that can help you make money.

Take out the smallest loan for which you can qualify — a credit card for example — make payments before they come due and pay it off as soon as possible. Do this a few times and creditors will look upon you favorably when you really need them to do so. 

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