diff --git a/src/core/ext/filters/client_channel/xds/xds_channel.cc b/src/core/ext/filters/client_channel/xds/xds_channel.cc
index d30cee047c9..a323e56dcc1 100644
--- a/src/core/ext/filters/client_channel/xds/xds_channel.cc
+++ b/src/core/ext/filters/client_channel/xds/xds_channel.cc
@@ -29,7 +29,8 @@ grpc_channel_args* ModifyXdsChannelArgs(grpc_channel_args* args) {
 }
 
 grpc_channel* CreateXdsChannel(const XdsBootstrap& bootstrap,
-                               const grpc_channel_args& args) {
+                               const grpc_channel_args& args,
+                               grpc_error** error) {
   if (!bootstrap.server().channel_creds.empty()) return nullptr;
   return grpc_insecure_channel_create(bootstrap.server().server_uri.c_str(),
                                       &args, nullptr);
diff --git a/src/core/ext/filters/client_channel/xds/xds_channel.h b/src/core/ext/filters/client_channel/xds/xds_channel.h
index e2f1f102e00..f78c0ba9dd0 100644
--- a/src/core/ext/filters/client_channel/xds/xds_channel.h
+++ b/src/core/ext/filters/client_channel/xds/xds_channel.h
@@ -24,6 +24,7 @@
 #include <grpc/impl/codegen/grpc_types.h>
 
 #include "src/core/ext/filters/client_channel/xds/xds_bootstrap.h"
+#include "src/core/lib/iomgr/error.h"
 
 namespace grpc_core {
 
@@ -36,7 +37,8 @@ namespace grpc_core {
 grpc_channel_args* ModifyXdsChannelArgs(grpc_channel_args* args);
 
 grpc_channel* CreateXdsChannel(const XdsBootstrap& bootstrap,
-                               const grpc_channel_args& args);
+                               const grpc_channel_args& args,
+                               grpc_error** error);
 
 }  // namespace grpc_core
 
diff --git a/src/core/ext/filters/client_channel/xds/xds_channel_secure.cc b/src/core/ext/filters/client_channel/xds/xds_channel_secure.cc
index 56a55096de7..52d226ce74b 100644
--- a/src/core/ext/filters/client_channel/xds/xds_channel_secure.cc
+++ b/src/core/ext/filters/client_channel/xds/xds_channel_secure.cc
@@ -64,7 +64,8 @@ grpc_channel_args* ModifyXdsChannelArgs(grpc_channel_args* args) {
 }
 
 grpc_channel* CreateXdsChannel(const XdsBootstrap& bootstrap,
-                               const grpc_channel_args& args) {
+                               const grpc_channel_args& args,
+                               grpc_error** error) {
   grpc_channel_credentials* creds = nullptr;
   RefCountedPtr<grpc_channel_credentials> creds_to_unref;
   if (!bootstrap.server().channel_creds.empty()) {
@@ -77,7 +78,11 @@ grpc_channel* CreateXdsChannel(const XdsBootstrap& bootstrap,
         break;
       }
     }
-    if (creds == nullptr) return nullptr;
+    if (creds == nullptr) {
+      *error = GRPC_ERROR_CREATE_FROM_STATIC_STRING(
+          "no supported credential types found");
+      return nullptr;
+    }
     creds_to_unref.reset(creds);
   } else {
     creds = grpc_channel_credentials_find_in_args(&args);
diff --git a/src/core/ext/filters/client_channel/xds/xds_client.cc b/src/core/ext/filters/client_channel/xds/xds_client.cc
index ad3fcad37c9..ee965c01ee5 100644
--- a/src/core/ext/filters/client_channel/xds/xds_client.cc
+++ b/src/core/ext/filters/client_channel/xds/xds_client.cc
@@ -472,12 +472,10 @@ grpc_channel_args* BuildXdsChannelArgs(const grpc_channel_args& args) {
 }  // namespace
 
 XdsClient::ChannelState::ChannelState(RefCountedPtr<XdsClient> xds_client,
-                                      const grpc_channel_args& args)
+                                      grpc_channel* channel)
     : InternallyRefCounted<ChannelState>(&grpc_xds_client_trace),
-      xds_client_(std::move(xds_client)) {
-  grpc_channel_args* new_args = BuildXdsChannelArgs(args);
-  channel_ = CreateXdsChannel(*xds_client_->bootstrap_, *new_args);
-  grpc_channel_args_destroy(new_args);
+      xds_client_(std::move(xds_client)),
+      channel_(channel) {
   GPR_ASSERT(channel_ != nullptr);
   StartConnectivityWatchLocked();
 }
@@ -1727,18 +1725,24 @@ XdsClient::XdsClient(Combiner* combiner, grpc_pollset_set* interested_parties,
       server_name_(server_name),
       service_config_watcher_(std::move(watcher)) {
   if (*error != GRPC_ERROR_NONE) {
-    if (GRPC_TRACE_FLAG_ENABLED(grpc_xds_client_trace)) {
-      gpr_log(GPR_INFO, "[xds_client %p: failed to read bootstrap file: %s",
-              this, grpc_error_string(*error));
-    }
+    gpr_log(GPR_ERROR, "[xds_client %p] failed to read bootstrap file: %s",
+            this, grpc_error_string(*error));
     return;
   }
   if (GRPC_TRACE_FLAG_ENABLED(grpc_xds_client_trace)) {
-    gpr_log(GPR_INFO, "[xds_client %p: creating channel to %s", this,
+    gpr_log(GPR_INFO, "[xds_client %p] creating channel to %s", this,
             bootstrap_->server().server_uri.c_str());
   }
+  grpc_channel_args* new_args = BuildXdsChannelArgs(channel_args);
+  grpc_channel* channel = CreateXdsChannel(*bootstrap_, *new_args, error);
+  grpc_channel_args_destroy(new_args);
+  if (*error != GRPC_ERROR_NONE) {
+    gpr_log(GPR_ERROR, "[xds_client %p] failed to create xds channel: %s", this,
+            grpc_error_string(*error));
+    return;
+  }
   chand_ = MakeOrphanable<ChannelState>(
-      Ref(DEBUG_LOCATION, "XdsClient+ChannelState"), channel_args);
+      Ref(DEBUG_LOCATION, "XdsClient+ChannelState"), channel);
   if (service_config_watcher_ != nullptr) {
     chand_->Subscribe(kLdsTypeUrl, std::string(server_name));
   }
diff --git a/src/core/ext/filters/client_channel/xds/xds_client.h b/src/core/ext/filters/client_channel/xds/xds_client.h
index 0552440cd8c..4cf4bc8222e 100644
--- a/src/core/ext/filters/client_channel/xds/xds_client.h
+++ b/src/core/ext/filters/client_channel/xds/xds_client.h
@@ -134,8 +134,7 @@ class XdsClient : public InternallyRefCounted<XdsClient> {
     class AdsCallState;
     class LrsCallState;
 
-    ChannelState(RefCountedPtr<XdsClient> xds_client,
-                 const grpc_channel_args& args);
+    ChannelState(RefCountedPtr<XdsClient> xds_client, grpc_channel* channel);
     ~ChannelState();
 
     void Orphan() override;