Bad Credit

AAA

DEFINITION of 'Bad Credit'

A qualification of an individual's credit history that indicates that a borrower carries a higher credit risk. A low credit score indicates bad credit, while a high credit score is an indicator of good credit. Creditors who have lent money to an individual with bad credit face a higher risk of that individual missing payments or defaulting.

VIDEO

Loading the player...

BREAKING DOWN 'Bad Credit'

An individual's credit history is dependent on a number of factors, including the amount borrowed, the amount of available credit remaining and the timeliness of payments. An individual may have bad credit if he or she does not make timely payments or has defaulted on a loan during a period of time. Having bad credit makes it more difficult or costly to obtain loans, such as mortgages, from financial institutions.

RELATED TERMS
  1. Credit Rating

    An assessment of the credit worthiness of a borrower in general ...
  2. Identity Theft

    The crime of obtaining the personal or financial information ...
  3. Credit Report

    A detailed report of an individual's credit history prepared ...
  4. Credit Risk

    The risk of loss of principal or loss of a financial reward stemming ...
  5. FICO Score

    A type of credit score that makes up a substantial portion of ...
  6. Jamming

    A scam perpetrated by bogus credit repair firms that involves ...
Related Articles
  1. Credit & Loans

    5 Keys To Unlocking A Better Credit Score

    Follow these tips and techniques to rebuild a ruined credit rating.
  2. Investing Basics

    What Is A Corporate Credit Rating?

    Is the bond you're buying investment grade, or just junk? Find out how to check the score.
  3. Entrepreneurship

    7 Unconventional Ways Businesses Can Borrow Money

    Find out how your business can get the money it needs - even when the bank says "no".
  4. Credit & Loans

    The Importance Of Your Credit Rating

    A great starting point for learning what a credit score is, how it is calculated and why it is so important.
  5. Professionals

    Why Bad Credit Is Bad For Financial Careers

    In order to obtain and maintain a career in the financial industry, it is also important to have a clean credit report.
  6. Options & Futures

    How To Establish A Credit History

    Can't get a credit card without a credit history, and can't get a history without a card? Break the Catch-22.
  7. Credit & Loans

    5 Easy Ways To Improve Your Credit

    These five tips will have you on your way to a stronger credit score and better rates.
  8. Credit & Loans

    The 5 Biggest Factors That Affect Your Credit

    Credit companies rely on these factors to determine whether to lend to you and at what rate.
  9. Credit & Loans

    Millennials Guide: Buying Your First House

    Millennial homebuyers need to research a lot of things, such as how much to pay, down payments, PMI, FHA loans and special programs for first-time buyers.
  10. Budgeting

    The 7 Best Ways to Get Out of Debt

    Obtain information on how to put together and execute a plan to get out of debt, including the various steps and methods people use to become debt-free.
RELATED FAQS
  1. Does marrying someone with bad credit affect my credit score?

    A credit rating is an assessment of an individual's creditworthiness. This evaluation is based on an individual's history ... Read Full Answer >>
  2. How can I improve my credit score?

    If you are looking to take out a loan or apply for a credit card, then it will be very important for you to have a good credit ... Read Full Answer >>
  3. Why would someone change their Social Security number?

    In general, the Social Security Administration, or SSA, does not encourage citizens to change their Social Security numbers, ... Read Full Answer >>
  4. What types of liens are seen as good and which are bad for my credit?

    Creditors that allow purchases to be made through financing often require property to be pledged against a credit account; ... Read Full Answer >>
  5. What are the typical requirements to qualify for closed end credit?

    Typical requirements for a consumer to qualify for closed-end credit include satisfactory income level and credit history, ... Read Full Answer >>
  6. What is the best way to start to rebuild your credit after a bankruptcy?

    Bankruptcies can be devastating to your credit score. Even worse, a bankruptcy will be listed on your credit report for between ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Recession

    A significant decline in activity across the economy, lasting longer than a few months. It is visible in industrial production, ...
  2. Bubble Theory

    A school of thought that believes that the prices of assets can temporarily rise far above their true values and that these ...
  3. Stock Market Crash

    A rapid and often unanticipated drop in stock prices. A stock market crash can be the result of major catastrophic events, ...
  4. Financial Crisis

    A situation in which the value of financial institutions or assets drops rapidly. A financial crisis is often associated ...
  5. Election Period

    The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether ...
  6. Shanghai Stock Exchange

    The largest stock exchange in mainland China, the Shanghai Stock Exchange is a nonprofit organization run by the China Securities ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!