What Is Bad Credit?

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Bad credit is usually defined as a credit score under 580. You're considered a risky borrower if you have bad credit as a result of owing large amounts of money or having a history of unpaid bills and debts.

Key Takeaways

  • A consumer with bad credit is considered a risky borrower, usually due to owing large amounts of money or having a history of unpaid bills and debts.
  • Having bad credit can make it hard to get a credit card, mortgage, car loans, rental approval, or even a job.
  • Bad credit is usually seen as a FICO credit score under 580.
  • You can improve bad credit by fixing errors on your credit report, paying off debt, and maintaining low balances on your credit cards.

Definition and Examples of Bad Credit

Having bad credit means that negative factors appear in your credit history, indicating that you're a risky borrower. Several factors can contribute to bad credit, including previous delinquencies, high debt balances, and recent bankruptcies.

Bad credit is usually indicated by a low credit score, the numerical summary of the information in your credit report. FICO scores are one of the most widely used credit scores. They range from 300 to 850, with higher scores being more desirable.

The FICO credit score range is broken up into five ratings:

  • Exceptional: 800 and above
  • Very Good: 740-799
  • Good: 670-739
  • Fair: 580-669
  • Poor: Below 580

How Bad Credit Works

Your credit score is based on five factors. Each is weighted differently. All of them can contribute to bad credit.

  • Payment history (35%): You're likely to have a lower credit score if you have a history of delinquent debts and late payments, or credit cards that you haven't paid off.
  • Amounts owed (30%): A bad credit score is often due to owing large amounts of money. The more you already owe, the less likely it is that you'll be able to pay off new debt.
  • Length of credit history (15%): You're a less risky borrower if you've been reliably paying off debts for many years. A shorter credit history will lead to a lower credit score. This is also influenced by how long your individual credit accounts have been open.
  • Credit mix (10%): Having a variety of types of credit, such as a credit card, a retail card, a mortgage, a personal loan, and/or a car loan, improves your credit score. Having only one type of credit account will lower it.
  • New credit (10%): People who open multiple new credit accounts in a short period of time are statistically riskier borrowers. They're more likely to have bad credit.

Your credit score gives you and lenders a quick indication of your credit standing, but you don’t necessarily have to check your credit score to know if you probably have bad credit.

A few signs of damaged credit can include having your application for a loan, credit card, or apartment denied, or experiencing unexpected cuts to your credit limits. Your interest rates on existing accounts might rise, and you might receive communications from one or more debt collectors.

Your credit score has likely taken a hit if you’ve been more than 30 days late on a credit card or loan payment, or if you have multiple maxed-out credit cards.

Ordering your credit score from myFICO.com is one of the best ways to confirm your current credit standing. There are also a number of free credit score services you can use to check at least one of your scores from the most widely used credit bureaus: Equifax, Experian, and TransUnion.


Free credit score services don’t always provide a FICO score. They often provide only a limited view of your credit. You may only get a credit score from Experian but not from TransUnion or Equifax.

You can take a look at your credit report to understand exactly what's affecting your credit score. This document contains all of the information used to create your credit score.

What Are the Penalties for Bad Credit?

Having bad credit can make it harder to get approved for new credit cards, a mortgage, or other loans. You may be offered a high interest rate or other unfavorable terms if you are approved.

Bad credit can impact other areas of your life, as well. Landlords may not accept you as a tenant, or they may only agree if you have a cosigner. Bad credit can even make it harder for you to get a job if your potential employer checks your credit score as part of your job application.

A good credit score shows that you’re a dependable borrower, which makes lenders more willing to have a relationship with you and give you funds. Consumers with very good or exceptional credit scores have better odds of loan, rental, and mortgage approvals. They can choose from a wider selection of credit card and loan products with more favorable interest rates.

How to Get Rid of Bad Credit

Having bad credit isn't a permanent condition. You can improve your credit score and demonstrate that you're a responsible borrower by correcting negative information and improving each of the five categories that make up your credit score.

Check and Correct Your Credit Report

Start by reviewing your credit report thoroughly. Look for any information that's incorrect, such as paid debts that are listed as delinquent or accounts that you never opened. You can dispute these errors directly with the credit reporting company by sending a letter detailing any mistakes. 

Check for information that should have been removed. With the exception of bankruptcy, negative information can only be listed on your credit report for up to seven years. You can dispute any negative items that haven't expired.


You may be a victim of identity theft if you find any items or accounts in your credit report that you don't recall opening. You may have to institute a credit freeze or fraud alert, notify your bank and credit companies, or even file a complaint with the FTC to resolve the issue.

Improve Your Credit Score

Removing negative information is just one part of the process. You should also add positive information by improving as many areas of your credit score as you can.

Keep your oldest credit account open and in good standing to add to your credit age. The longer you’ve had credit, the better it is for your credit score.

Don't take on new debt or close credit cards in order to change your credit mix or amount of new credit. Closing credit accounts suddenly will leave you with a higher debt-to-available-credit ratio. It can negatively impact your credit score.

Focus on improving your payment history and lowering the amounts you owe. These are the two biggest factors in a bad credit score. Work toward bringing past-due bills current and paying down high balances. Continue to make regular payments on all your debts while focusing on paying off your larger ones.

Open new accounts sparingly. Take on only as much debt as you can afford. Make on-time payments. Keep your credit card balances low, and monitor your progress using a free credit score tool.

You might notice some improvement in your credit score right away when you’re caught up on payments, and positive information starts to show up on your credit report. It can take anywhere from several months to a few years to completely fix your bad credit, depending on how low your credit score was to start with.

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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. myFICO.com. "What Is a FICO Score?"

  2. myFICO. "What's in my FICO Scores?"

  3. Federal Trade Commission. "The Fair Credit Reporting Act," Page 22.

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