Rumor has it that no credit is the equivalent of bad credit, and that the future is bleak for those who do not have a history of credit. While there are sometimes obstacles associated with having no credit, those who lack credit history are not out of luck. And to prove it, the following tackles some misconceptions surrounding the topic of no credit.
No Credit is Not the Same Thing as Bad Credit
No credit often gathers a bad reputation because it can sometimes limit one’s financial opportunities, but this is not the same as having bad credit. For those who have no credit, it simply means they have not established credit history, so it is impossible to rate their score when they have no credit to judge in the first place.
Bad credit, on the other hand, reveals inconsistencies in one’s financial past, which could be a result of late payments or bad debt. Sometimes lenders do not like to provide service to those with bad credit because they are seen as a financial risk.
Some Lenders Will Lend Money to Borrowers with No Credit
It is possible to borrow money even with no credit history. For example, when the time comes to apply for an auto loan or a home mortgage, there are various first-time buyer programs available to those with no credit. These plans vary in their qualifications, but often times they require good payment records on rent, insurance, or sometimes utility bills.
In the case of an emergency, those who do not have credit history can take out a bad credit loan to cover an unexpected expense because these lenders usually do not ask for a credit check. Such cash advances do have high fees and interest rates though, so carefully read and understand the loan terms and only apply if it is an emergency-type situation.
Certain Card Card Companies Will Provide Service to Applicants with No Credit
There are several ways to apply for a credit card with no prior credit history, such as registering for a credit card with a co-signer who has good credit standing. Keep in mind though, if the credit card user demonstrates financial delinquency, it will affect both the user’s and the cosigner’s score. Those who decide to take this route should only do so if they can uphold financial responsibility.
Another option is a secured credit card, in which one must pay a deposit that the card issuer will use as collateral for any failed payments. Many secured card issuers will report this new credit history to the major credit bureaus to help the user build credit.
Although there are ways of maneuvering around no credit obstacles, it is never too late to begin building credit. For those looking for financial advice, contact a credit counseling organization such at the National Foundation for Credit Counseling for monetary guidance.