What is Bad Credit? It is the rating set by the financial organizations to monitor the borrower’s credit history, factors mainly comprising of late payments, loan defaults, repossession, foreclosure, bankruptcy, late repayments of loans/debts, credit rejections, past due and unpaid payments, and most importantly types of credit used. Borrower with late or bad repayments on the credit agreements are reported by the creditors to the Bad credit Information agencies such as Experian, Equifax and Trans-Union in USA. These agencies provide borrower’s bad credit information online, to lenders/financial institutions.
Bad credit information agencies or bureaus have categorized the bad credit borrowers using different credit score tools. Similarly, the bad credit lenders also use the credit score to identify the borrowers with low risk bad credit borrowers, so called Subprime borrowers. Subprime category needs a credit score above 620 or 640 to qualify for the Bad credit loans. Lesser score borrowers fall in to the undesired category for subprime lenders.
Borrowers are usually unaware of their credits score reports and, would not know that these reports are kept on the records for 7 to 10 years under the “Fair Credit Reporting Act” which actually mandates the length of records based on the type of credit report for example, unpaid tax liens which remain for 15 years. Bad credit reports can remain filed for the stated period unless the borrowers take serious measures/action to prove the positive improvements and provide evidence for the paid debts/loans or any paid off credit agreement.
For subprime borrowers the loans are provided at very steep interest rates. What is more important is to know your own credit score before you apply any credit facility. How to know your credit score? Simple, it’s available online from the Fair Credit reporting agencies/bureaus. It is advised to check the credit scores at least once in six months.
“No matter how bad your credit is, you can take steps that will make it better.”