All About Bad Credit

Many a times you might have heard the term 'bad credit' without being completely aware about it. There are other terms like adverse credit, poor credit, low credit etc which are synonymous with this. Advertisements for bad credit loans are one of the commonest places where you might come across this term. What exactly does bad credit mean? Well, for starters, credit means that you use someone else's money for your needs. Bad credit means that you are a bad creditor. If someone lends you money, you have more chances of defaulting on that payment than repaying it. But who determines whether you have bad or good credit? Credit rating agencies are the people who do it. These are companies that measure the credit worthiness or ability to pay back a loan of a person on the basis of the data provided to them by lending organizations.


Where Does it Come From?

Now that you know that bad credit is considered to be negative credit rating and most lenders will shun away from a person who has a bad credit rating, you also need to know the possible reasons for a person to have a bad credit rating. On more occasions than not, bad credit is often the result of ignorance about the adverse affects of credit. For example, there are students who get credit cards. They go on a spending spree and the result is debt. Now, there are some who promptly pay back the debt and there are some who simply stop paying after a couple of payments. The worst thing about credit cards is that you will not even realize how soon you will fall into a warp hole. The debt simply mounts and before you know you have a bad credit history.


Credit Information


The data reported by the credit agencies is extremely detailed. It contains all information about your previous credit and financial transactions. Usually it includes payment history, credit limits, recovery methods used, balance information etc. Any potential lender first navigates through this information before deciding whether you are eligible for credit or not. Based on this information every person has a credit score that is a numeral between 300 and 850 with the former being the lowest and the later the highest. Usually a credit score below 500 is considered to be bad credit. So if you are a person with a credit score below 500 then consider loans to be a distant thing for you. The other option that you have is to opt for bad credit loans.


Getting Your Credit Information

As a citizen of the United States you too are eligible to know your credit score. There are laws in place to keep the entire credit process fair and square. All that you have to do is request a copy of the credit history and you will get one free copy every year. This will help you determine whether you have bad credit owing to your bad payment habits or there is an error in the credit history. Yes, there can be errors in the credit history as well.