Bad Credit

Definition

  • An entity that poses a higher credit risk to a lender. Bad credit indicates to a lender that the borrower has an increased chance of missing payments or outright defaulting on a loan. Those with bad credit are more likely to be denied credit, and if they are approved for credit, they will likely be charged a higher interest rate because of the increased risk to the lender. An individual with bad credit will have a low credit score whereas an individual with good credit will have a high credit score.

Synonyms
bad credit history, high credit risk, sub-prime

Related Terms and Acronyms

  • Bad Credit Loan Definition,
    • A loan taken out by someone with bad credit.
  • Collection Definition,
    • The efforts used to bring an overdue mortgage, or other debt current, and the filing of necessary notices to proceed with foreclosure when necessary.
  • Credit Bureau (CB) Acronym, Very Important,
    • A company that collects and sells information about how people handle credit. It issues credit reports that list how individuals manage their debts and make payments, how much untapped credit they have available and whether they have applied for any loans. The reports are made available to individuals and to creditors who profess to have a legitimate need for the information.
    Company that determines one's credit worthiness.
  • Credit Reporting Agency (CRA) Acronym,
    • An organization that prepares reports that are used by lenders to determine a potential borrower's credit history. The agency obtains data for these reports from a credit repository as well as from other sources.
  • Credit Score Definition,
    • Also referred to as a 'Beacon Score' is a number, between 300 and 900, that reflects a person's credit history. Lenders calculate this number using a computer system as part of the process for assigning rates and terms to the loans they grant.
  • Credit Worthiness Definition,
    • How likely an individual or entity is to default on their debt.
  • Default Definition,
    • When a borrower fails to fulfill the obligations of a loan or lease.
  • Delinquency Definition,
    • Failure to make mortgage payments when mortgage payments are due.
  • Equifax (EF) Company Est. 1899, Canada, Important,
    • A major credit bureau company in Canada along with Trans Union.
  • Experian (XP) Company, Canada,
    • One of the Big Three credit bureaus, along with Equifax and Trans Union, Experian not normally used in Canada.
  • Foreclosure Definition,
    • The legal process by which a borrower in default under a mortgage is deprived of his or her interest in the mortgaged property. This usually involves a forced sale of the property at public auction with the proceeds of the sale being applied to the mortgage debt.
  • Good Credit Definition,
    • Someone who carries little credit risk.
  • Loan Shark Definition,
    • A lender that provides loans at usuriously high interest rates, often ensuring repayment with the threat of force.
  • No Credit History Definition,
    • To have no record of an individual's credit worthiness.
  • Predatory Lending (PL) Acronym, Important,
    • Lending practices that are unfair, deceptive or fraudulent.
  • Secured Credit Card Definition,
    • A credit card that a cardholder secures with a savings deposit to ensure payment of the outstanding balance if the cardholder defaults on payments. It is used by people new to credit, or people trying to rebuild their poor credit ratings.
  • Secured Loan Definition,
    • Borrowed money that is backed by collateral.
  • Sub-prime Borrower Definition,
    • A borrower with a less-than-perfect credit report due to late payments or a default on debt payments.
  • Sub-prime Mortgage Definition, Important,
    • A mortgage loan that is granted to a borrower who is considered sub-prime (has a less-than-perfect credit report). Sub-prime borrowers have either missed payments on a debt or have made late payments. Lenders charge a higher interest rate to compensate for potential losses from customers who may default on the loan.
  • Title Loan Definition,
    • A loan that uses a car as collateral.
  • TransUnion (TU) Acronym,
    • One of the major Canadian credit bureau companies along with Equifax.
    See TransUnion Canada.
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