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Bottom Line Up Front

  • Having no credit just means the major credit bureaus and lenders don’t have enough information about how creditworthy you are. But you can take steps to establish new credit and start building a credit history.
  • If you have bad credit, you’ve likely made some missteps when you’ve borrowed money in the past. Don’t worry! There are ways you can improve your credit score.
  • You should aim for good credit so you can qualify for the best terms and interest rates on loans and credit cards.

Time to Read

3 minutes

May 4, 2022

We hear a lot about the importance of having good credit. You might know that having good credit can qualify you for better terms and interest rates for credit cards and loans. Businesses such as cell phone providers and utilities along with apartment rental managers also check your credit. But what happens if you have no credit and no credit history, or your credit isn’t strong? Is no credit better than bad credit? While the situations are different, each poses similar challenges.

How to Build Credit

Having no credit isn’t the same as having bad credit. When you have no credit, it means that credit bureaus have no financial information about you because you don’t have a credit report. This can be because you’ve never taken out an auto loan, a personal loan or a credit card. You have no credit history so they can’t do a credit check. When lenders don’t know if you’re a credit risk, it can be difficult for you to get a loan or credit card. And, it’s even tougher to get the best credit cards available.

Here are two ways you can start building great credit:

  1. Ask a family member to add you as an authorized user on their credit card. You’ll receive your own credit card, but the primary card owner sets a spending limit on how much you can charge. This arrangement offers advantages for you both. You’ll learn how to use credit wisely, and the account holder can earn rewards on your purchases.
  2. Apply for a secured credit card. You’ll make a cash deposit into a savings account. This deposit acts as collateral for charges you make on the card. For example, if you deposit $300 into a savings account when you apply for a secured credit card, that amount is your credit limit. Make on-time payments and keep a low balance to help build your credit. As an added bonus, you may be eligible for credit card rewards. And, with a card like Navy Federal Credit Union’s nRewards® Secured card, you can earn dividends on the initial deposit you put into the savings account. It can take about 6 to 9 months to establish credit from scratch. Show lenders your creditworthiness and keep the momentum going by learning more about taking the right steps if you have no credit.

Turning Around Bad Credit

Having a low credit score tells lenders and other businesses that you’ve had some problems managing your personal finances. Maybe you’ve had your share of late payments or gone over your credit card limit. But don’t give up! You may be able to get your bad credit score moving in the right direction with the following steps:

  • Pay your credit card bills on time to develop a good payment history. Limit your monthly spending and try to pay more than the minimum monthly payments due on your credit card bills, if possible. This shows lenders that you’re in control and managing your money responsibly.
  • Avoid using all your available credit on your credit cards. Financial experts recommend keeping your credit utilization low and not maxing out your credit cards or other lines of credit.
  • Make sure the information on your credit report is up to date. Check your credit report every year to look for errors that can affect your credit score. If you find an error, report it to the appropriate credit bureau.
  • Find out what else you can do if you have poor credit and need help improving your credit.

On the Right Track

Whether you’re working to build your credit or are in the process of repairing it, Navy Federal Credit Union is here for you. Learn more about our products and services that can help, such as our secured credit card. Navy Federal members can check your credit score for free. If you have no credit or bad credit, we can help you work toward good credit.

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This content is intended to provide general information and shouldn't be considered legal, tax or financial advice. It's always a good idea to consult a tax or financial advisor for specific information on how certain laws apply to your situation and about your individual financial situation.