Adverse credit history can come under a number of different headings. It can also be known as a poor credit history, non-status credit history or impaired credit history. These terms are all used by credit companies when judging a person's credit history.
When someone applies for a loan, lenders, banks and credit card companies will look at that person's credit history in order to judge his or her financial credit standing. They gain this information from credit agencies, companies that track people's history of repaying credit and loans. They have information on individuals' financial transactions when repaying loans or credit. They are able to use this information to tell whether a person has a good or bad history of using credit.
Credit agencies track everyone's repayments on loans and other forms of credit. They keep this information on record and assign each person a credit score. If this number is below a certain amount, then the person will be marked down as having an adverse credit history. This may mean that he or she is unlikely to repay his or her credit transaction on time or that he or she may miss payments altogether.
Financial institutions such as banks and credit card companies purchase this information from the credit agencies. They, therefore, have at their disposal information to ascertain whether each person who applies for credit is a safe enough risk to lend to. This information can be used in corporate dealings and personal finance.
If a person is shown to have an adverse credit history, the lender may simply refuse to give him or her credit, or it may offer a lower amount of credit than requested. Due to the borrower's poor credit history, the lender may also offer credit at a much higher rate of interest than would be offered to someone with good credit.
There are many ways to change an adverse credit history and credit score. Obtaining help from a debt counseling service, or debt consolidation service if a person is in debt, can eventually raise his or her credit score closer to what is average. It may take many months or years to do this, but it is more financially viable in the long run.
People should also be aware that an impaired credit history might not always be the individual's fault. A credit agency may still show him as having a bad history with credit even if he have paid off his debts. Financial experts recommend that everyone get a copy of their credit information file yearly to verify their standing.
Many people have found that the information on a credit agency report is incorrect. There are debts that are sometimes not removed from the report even months and years after they have been paid off. These can still affect a person's credit history, and it is in the individual's best interest to have them removed.