Bad Credit History

Reviewed by Vishnu | Updated on Feb 01, 2023


What is Bad Credit History?

A bad credit history describes the borrower’s inability to keep up with the credit repayments in the past. A bad credit history informs the credit companies of a borrower’s incapability to adhere to credit responsibilities and can result in the borrower being ineligible for a new line of credit.

Understanding Bad Credit History

Credit reporting agencies collect the borrowers’ credit history and include it in the credit report. Credit reports and credit scores exist so that credit companies can assess prospective customers depending on the underwriting credit requirements. Loan defaults, delayed payments, and poor records on the credit report can impact the credit score.

In the event of poor credit history, credit lenders are less likely to provide a new line of credit as the adverse history can be considered an indicator of failure to make payments on new loans or credit cards.

The chances of getting the credit application denied are usually high in the case of poor credit history. However, credit agencies might still decide to approve your application. The only catch would be that you would most likely receive a higher rate of interest than the applicants with a good credit score and credit history.

Impact of Bad Credit History

Credit repayments play a crucial role when it comes to evaluating credit scores. An adverse credit history indicates that you are more likely to default on your credit obligations. Also, the credit lender can consider you to be a riskier borrower when compared to a borrower with a good credit score. In such cases, credit companies can choose to charge you with a higher interest rate to compensate for the risk.

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