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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 cellphone providers, utilities and apartment rental managers also check your credit.

But what happens if you have no credit, or your credit isn’t strong? Is no credit better than bad credit? While the situations are different, each poses similar challenges.

Establishing 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 a loan or credit card. When lenders don’t know if you’re a credit risk, it can be difficult for you to get a loan or credit card.

Here are a few ways you can start building great credit:

  • 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.
  • 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 you can earn dividends on the initial deposit you put into the savings account.

It can take about six to nine months to establish credit from scratch. 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 finances, but don’t give up! You may be able to get your score moving in the right direction with the following steps:

  • Pay your credit card bills on time. Limit your monthly spending and try to pay more than the minimum balance 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 card 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 ding your credit score. If you find an error, report it to the appropriate credit bureau.

Find out what else you can do if you need help improving your credit.

On the Right Track

Whether you’re working to build your credit or in the process of repairing it, Navy Federal Credit Union is here for you. Learn more about our products and services to help, such as our secured credit card. You can check your credit score for free if you’re the primary account holder of a Navy Federal Credit Card.

No credit or bad credit, we can help you work toward good credit.


This article 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.