If you’re getting ready to apply for a new loan or credit card, or you’re just starting to establish your credit, it’s important to understand the difference between having no credit score and having a bad credit score. Credit scores are determined by what’s in your credit report and history. While both a bad credit score and no credit score isn’t ideal, with small changes, you can improve your credit—or establish it—using these tips.

What does it mean to have no credit score?

If you don’t have a credit score, you likely don’t have a credit history. Credit history is a complete record of an individual’s credit and debt management. Those who have no credit score are usually recently graduated high school or college students, assuming they didn’t take out student loans. This can also apply to those who have come to the U.S. from another country.

As a result of having no credit score, you may be unable to get a credit card or loan because lenders don’t know your credit history and/or financial state. Establishing a credit score requires work, but it’s manageable if you take the right steps. Here are some ways in which you can build your credit score:

  • Deposit money into a Certificate of Deposit (CD). Through this, you can take out a CD secured loan, which can help build your credit.
  • Open a savings secured credit card. For example, if you deposit $1000 into this savings account, the bank will automatically give you $1000 on your credit card. They will then put a hold on the savings account for 12 months until you’ve established a credit score.
  • Make payments on time. By paying your bills on time, you’ll start to establish a strong credit score right away.

What does it mean to have a bad credit score?

A bad credit score usually results from a financial slip up, such as missing a credit card payment, defaulting on a loan, or having accounts sent to collections—but keep in mind that this financial situation can apply to anyone.

Most banks consider a bad credit score to be below 600, and lenders typically won’t work with someone who has a credit score lower than this. If you’re in this situation, here are some ways you can improve your score:

  • Pay off any judgements, collections or debt.
  • Open a Certificate of Deposit (CD).
  • Open a savings secured credit card.
  • Make payments on time. After making on time payments for a year, you’ll start to see a positive repay history.

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