Bad credit is the leading factor that prevents people from getting loans, mortgages, etc., at favorable terms and conditions. Bad credit means bad news for a person who is not paying their dues on time. Bad credit would hinder achieving financial milestones like paying off credit card debt.

When a person applies for a loan such as a car loan or home loan, the creditor will look at their credit report. The credit report will show a black and white image of the individual's financials and whether they are in an excellent position to qualify for a loan. The creditors' primary concern is an individual's credit score. It is a three-digit number that denotes the capability of the person to pay off the debt.

Certain factors are linked to the credit score, including payment history and debt, which speak about the individual's record of paying back loan payments.

Bad credit is when the individual is having lower than average credit score. The average score is fixed as per different credit scoring models. These scores are found through equations that have determined a specific range to be bad, fair, good, and excellent as per the scoring model.

The app will look at the basics of a poor credit score. We will discuss the two scoring models used by creditors and a poor credit score as per these models. The app will list down the causes that result in bad credit scores. We will study the factors that are having a direct impact on credit score and their repercussions. The article will discuss the ways to improve a bad credit score.

Let’s take a look at the basics of bad credit score to understand it better.