Good question. The short answer is, yes.
The conventional wisdom is that no credit is better than bad credit. Think of having no credit as a blank wall and having bad credit as a wall with graffiti on it. The first wall is a blank canvas, so it’s easier to transform it into the positive image you want. The second wall, because of the mess, needs to be cleaned up or painted over before a more pleasing image can replace the graffiti.
Still, the no-credit and bad-credit borrowers face similar problems: Higher rates, tougher qualifying standards, and a greater possibility of being denied a loan.
The bottom line: Bad-credit or no-credit borrowers have a statistically higher likelihood of being unable to pay back the loan. Lenders do what they can to lower their risk if they decide to approve a borrower like this. This means they charge these higher-risk individuals more for the privilege of borrowing from them.