What does Bad credit mean?

A person with bad credit means that his credit score is low. This number is statistically derived from a number of factors, the score gets lower whenever the person in question does one or more of the following: exceeds credit card limits, makes late payments, even skips payments, or declares bankruptcy.

The credit score can be a number from 300 to 850 the lower the number the worse a persons credit is. This number is of great significance to a lender, as it affects the decision to extend credit and the terms of the credit as well. An example of bad credit would be that any borrower that has a score under 600 will be unable to get a prime mortgage and will be obliged to go to a sub prime lender for mortgage, which probably has a much higher interest rate. This credit score is so important that if it sinks under a certain point, and the person is declared as having “bad credit”, he or she will be denied future credit.