Bad Credit Definition

Bad credit is a relative term used to describe a person with a poor credit history. For example, a person who has filed a bankruptcy, had a home foreclosure, walked away from a term rental contract, or experienced an automobile repossession will be generally considered to have bad credit. More than this, however, a person who habitually misses payments of any kind, from credit cards to utility bill payments, or is habitually late in making payments of any kind will also be viewed as having bad credit.

Individuals attempting to obtain loans, purchase a vehicle or home, or even rent an apartment will have their credit history reviewed. If the credit history is unsuitable to the present need, the loan or process application will be denied because of their previous credit history. For example, an apartment manager might refuse to rent an apartment to an individual with a history of missed telephone bill payments.

Another common result of having bad credit is paying more for the same services to compensate for perceived risk. For example, an apartment manager might rent an apartment to an individual with a history of missing telephone bill payments with the stipulation that they make a $1,000 initial deposit. In this case, the deposit is intended to lower the risk to the apartment manager in the event that the tenant leaves without paying a bill that is owed.