What is Considered Bad Credit

“We regret we are unable to approve your application at this time.”

Anyone who has applied for a new credit card and been rejected is familiar with that statement. The rejection is usually due to bad credit, and that can be caused by a number of things people usually don’t pay enough attention to.

The most obvious sign of bad credit is having a credit score less than 620. The credit score range is from 300 to 850. A score of 620-720 is considered average; anything above that is good and anything below that is bad.

The credit score is the first thing financial institutions look at when determining whether or not to approve loans, mortgages, etc.

Another sign that a person is suffering from bad credit is when they let items go to a debt collector – instead of paying off the debt in a scheduled amount of time. Debt collection notices, bankruptcies and tax liens all lead to a bad credit score.

Consumers who have used more than half of their available credit lines will be labeled as individuals with bad credit as well.  If the credit cards are “maxed out” or almost full, the credit score will be damaged.

In addition, if the amount on the cards is high and the bank accounts or other revolving accounts are low, consumers will get the “bad credit” label stuck on them every time.

Although there are ways to turn a bad credit score into a good one, a significant piece of bad credit to avoid involves student loans. If a person defaults on a student loan, it will never come off his or her credit history.

Serious delinquency is another term associated with bad credit. It is tied to a series of late payments on credit card accounts or others with set monthly fees. The term also applies to situations where payments are missed.

If a consumer has one, two or even three late payments, a financial institution is likely to try and work with him or her. But if it gets beyond that, it becomes a problem and gets labeled “bad credit”.

If there is a significant length of time since an account has been paid, according to an agreement established with a financial institution, the score will drop. When an agreement of this type is made, the consumer needs to make every effort to stick to the agreement.

Having bad credit will make getting loans, credit cards, auto insurance, cellular phones and even jobs very difficult. That’s why those two words are so powerful – and why consumers are working hard to avoid them.