Adverse Credit History – How Does Adverse Credit History Affect You?

Most people use the term adverse credit history and you wonder what it means. It simply means someone has a poor or bad credit history. The term therefore is used to describe people who may have struggled to manage credit in the past.

What is Adverse Credit History?

Is a term lenders use to define and classify consumers who have less-than-stellar credit histories when being considered for a loan or credit. This may include late payments of 90 days or more, deficiency judgment, garnishment orders, repossessions, bankruptcy, foreclosures, tax liens, and/or debt write-offs.

How Does Adverse History Affect You?

When you apply for credit, the lender checks your credit history. Where you have a good credit history and meet other criteria, the lender will be happy to extend credit to you. However, if your credit history is poor, some lenders may decide not to lend to you, or offer you a product that has a less interest rate. When this happens, it is known as “adverse credit”.

What is Your Credit History?

It is very important to understand the state of your credit history. This is because, every time you take out a credit product, like a loan, mortgage, credit card, or mobile phone contract, it is being told to three credit reference agencies which are Experian, Equifax, and TransUnion.

Each month, your lenders report to the agencies how you have made your payments in full and on time. This data is held by the credit reference agencies for six years.

Adverse Credit History – Lenders & Borrowers

When it comes to creditors and lenders, they care about the adverse credit history of a borrower. This is because if a borrower has had credit issues in the past.  They are more likely to repeat the same in the future. Thus, lenders may not want to extend credit. Or may only be willing to lend money at a higher interest rate. Than what they charge their lowest risk customers with no A.C.H.

Borrowers, on the other hand, can find out if they have an adverse credit history. By getting a free credit report from each of the three major credit bureaus. Which are Experian, Equifax, and TransUnion. Credit card companies also give customers the option of obtaining a monthly credit score update via their services. With the report having no effect on a credit score through a soft inquiry.

Where it concerns student loans. Adverse credit history has a very specific meaning. It implies that a borrower has 90-day delinquency on any debt. Or that they have experienced a specific adverse credit event within the last five years like bankruptcy, repossession, or tax lien. Adverse credit history makes a borrower ineligible for a federal PLUS loan.

In conclusion, borrowers are likely to find it more difficult to obtain credit and may have to pay higher interest rates on loans or require subprime lending.

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