If you have never had a student loan, car loan, or credit card, your credit history may blank. You may be among those people who are proud of having no debt. However, having no credit history has its downfall, especially when it comes to financing significant purchases in your life.
On the other side, if you have a credit history but have made a few missteps in the past, you might be looking at bad credit history. A credit history revealing past mistakes makes you less attractive to potential lenders and even potential employers.
Whether you have bad credit or no credit history at all, each scenario poses its unique challenges.
In this post, we try to establish which one of the two is somehow better.
How Are the Two Terms Different?
If you have no credit history, it means you have never taken a loan in the past seven years. It can also mean you haven’t bought anything from an official credit provider. While many people think that this is a good thing, it can work against you in the long run.
Keep in mind that you will need some form of financing when you decide to make significant purchases in your life, such as buying a home or car. Creditors need a track record to know if they can trust you.
On the other side, bad credit means you have made financial mistakes in the past, and you are now paying the price. In most cases, bad credit occurs as a result of defaulting on loan agreements.
In simple terms, you did not pay your loan when you said you would, and it may have developed a pattern in the long run.
How Are They Similar?
Whether you have bad credit or no credit history at all, one thing is for sure; you do not have good credit. Without a good credit rating, you will face an uphill task while trying to apply for a loan.
Potential lenders will always want to know with certainty whether or not you will repay borrowed money on time.
Most of them are not willing to risk loaning money to people whose creditworthiness is a question mark or worse those with a track record of poor payment. Fortunately, you can still apply and qualify for a loan from a no credit or bad credit loan Montreal lender if you fall into this category.
No Credit vs. Bad Credit: Which One Is Better?
While neither of them is ideal, building a new credit history is much easier than trying to fix an already bad credit history. With no credit, it means you are starting your struggles on a clean slate, and all you have to do is convince the creditor you can handle finances responsibly.
You can think of having no credit history as trying to be friends with a stranger you just met while having a bad credit history can be viewed as trying to be friends with someone whose trust you already broke in the past.
Bad credit history can be hard to overcome because potential lenders see your past mistakes and may not be willing to risk again.