"No Credit" versus "Bad Credit" Whatever your need for money, sooner or later you may need a loan, then you will discover the true meaning of good credit, bad credit, credit ratings and scores. There are countless types of loans from banks and other financial institutions, organizations, private lenders and even grants from Federal entities, like those that aid in covering the costs of college. We can easily say that there is a loan for every need, but there is not an easy way to get any of them when the borrower does not have a good credit history or none at all. Establishing a credit history is important, thinking of your financial future, although there is a general misconception that establishing a history is near impossible while you are young. Sometimes a credit history begins to be written as early as childhood, when a kid receives his/her first savings account, although this habit is not implemented for all families. However, the sooner you start with a savings or checking account, the more your credit history will have to tell when it is time to discover if you are eligible to apply for a loan. It is never too late to start building your credit, because no credit will always be worst that bad credit. While bad credit may happen involuntarily when you fail paying off your debt or due inaccuracy in your credit reports, but it is always possible to repair a bad credit history and even borrow money when your credit is still damaged, although at higher interest rates. Many people with no credit history go wrong getting one or more prepaid credit cards in order to qualify for a loan. Due to the fact that there are many key points to consider, it is more likely to be rejected after submitting a loan application, or any other financial product or service requiring a credit history, whether good or bad, that those cards cannot provide. Instead of trying to play it easy with prepaid credit cards if you do not have credit, open both a savings and checking account keeping a higher balance. The longer you keep this higher balance and establish a credit history the easier it will be when you apply for credit. You can apply for a credit card at one of your local merchants or get a co-signer for your first credit attempt. A co-signer is often referred to as a co-borrower, the person who accepts responsibility for repaying a debt along with you. Having a co-signer is also advisable when you have no credit or are an undergraduate student, a non-U.S. citizen or a non-eligible permanent resident. Co-signers also help when your credit is poor or you have exceeded certain limits, or you do not meet the lender's criteria for granting a loan, including when you have a little credit history on which the lender can make a credit decision to finance you with a loan. However, the best way to establish a credit history is getting a credit card, maintaining a low income to debt ratio. This will be easier over time, once your savings, checking and mall accounts generate your first credit reports. It may be hard but not impossible to get a mortgage to buy a house; as collateral, it will help you to generate a credit history and obtain many other credits and loans. Having a bad credit history, there is always a chance to repair your bad credit by investing some of your time into timely monthly payments to pay off your debt and request your credit report to check for any inaccuracies. Credit errors do in fact happen and can be disputed and corrected. Credit reports contain importation information about the individuals, including where they live, work and their bill and paying habits. We advise that credit repairs can be done by you, yourself, and you should avoid credit repair companies if you can. In the United States, there are three credit bureaus that compile and sell these reports to companies, institutions and organizations that need to evaluate your applications, whether for loans, credit, insurance, employment or any other purpose allowed by the federal law. The credit bureaus are listed below. It is recommended that you check your credit files on a quarterly basis.
Additional information on bad credit:
Contacting the Credit Bureaus | 