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GLOSSARY

Canadian Financial, Real Estate and Mortgage Glossary

How often this word is used
 
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50% - Moderately

Bad Credit


Synonyms:bad credit history, high credit risk, sub-prime
Filed Under: financial-banking, mortgages
Tags: banking, credit, mortgage
 

Definition of bad credit

bad credit
1. An entity that poses a higher credit risk to a lender. Bad credit indicates to a lender that the borrower has an increased chance of missing payments or outright defaulting on a loan. Those with bad credit are more likely to be denied credit, and if they are approved for credit, they will likely be charged a higher interest rate because of the increased risk to the lender. An individual with bad credit will have a low credit score whereas an individual with good credit will have a high credit score.

Related Terms and Acronyms:

  • credit bureau (CB)   A company that collects and sells information about how people handle credit. It issues credit reports that list how individuals manage their debts and make payments, how much untapped credit they have available and whether they have applied for any loans. The reports are made available to individuals and to creditors who profess to have a legitimate need for the information.
      ➥  Company that determines one's credit worthiness.
  • Equifax (EF)   A major credit bureau company in Canada along with Trans Union.
  • good credit   Someone who carries little credit risk.
  • no credit history   To have no record of an individual's credit worthiness.
  • predatory lending (PL)   Lending practices that are unfair, deceptive or fraudulent.
  • secured credit card   A credit card that a cardholder secures with a savings deposit to ensure payment of the outstanding balance if the cardholder defaults on payments. It is used by people new to credit, or people trying to rebuild their poor credit ratings.
  • sub-prime borrower   A borrower with a less-than-perfect credit report due to late payments or a default on debt payments.
  • sub-prime mortgage   A mortgage loan that is granted to a borrower who is considered sub-prime (has a less-than-perfect credit report). Sub-prime borrowers have either missed payments on a debt or have made late payments. Lenders charge a higher interest rate to compensate for potential losses from customers who may default on the loan.
  • title loan   A loan that uses a car as collateral.
  • TransUnion (TU)   One of the major Canadian credit bureau companies along with Equifax.
      ➥  See TransUnion Canada.

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