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 Bad Credit
Adverse credit history, also called sub-prime credit history, non-status credit history,
impaired credit history, poor credit history, and bad credit history, is a negative credit rating.
A consumer or business' credit history is regularly tracked by credit rating agencies.
The data reported by these agencies is primarily provided to them by creditors and includes detailed
records of the relationship a person or business has with the lender. Detailed account information,
including payment history, credit limits, high and low balances, and any aggressive actions taken to
recover overdue debts, are all reported regularly (usually monthly). This information can be quite
detailed and arduous to navigate by a potential lender dealing with a new applicant. To address this
issue, credit scoring was invented.
All credit bureaus also offer a supplemental service called credit scoring. Credit scoring is the
process of using a proprietary mathematical algorithm to create a numerical value that alleges to be a
total picture of an applicants creditworthiness. Scores, frequently based on numbers (ranging from 300-850
for consumers in the United States), are alleged to statistically analyze a credit history, in comparison
to other debtors, and gauge the likelihood of the magnitude of financial risk. Since lending money to a
person or company is a risk, credit scoring offers a standardized way for lenders to assess that risk
rapidly and "without prejudice.
Credit scores allege to assess the likelihood that a borrower will repay a loan or other credit obligation.
The higher the score, the better the credit history and the higher the probability that the loan will be
repaid on time; this theory purports. When creditors report an excessive number of late payments, or
trouble with collecting payments, a "hit" on the score is suffered. Similarly, when adverse judgments and
collection agency activity are reported, even bigger "hits" on this score are suffered. Repeated hits can
lower the score and trigger what is called a negative credit rating or adverse credit history.
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