Squib's are still part of a wizard family.. that's why they're called Squibs and not Muggles.
If you have 3 generations of wizarding family- Pure Blood.
If you're a wizard with less than 3 generations without Muggles in your line- then HalfBlood
It's not MudBlood.. that's just rude. The term is MuggleBorn- which the child of a known Squib isn't.
Arguably all MuggleBorns are likely the children of Squibs- it's just that no one knew about the Squib when they joined the Muggle community.
I don't know what the chances are of a person with truly no wizarding heritage to spontaneously become a wizard.. or how you'd tell.