Adverse Credit history

Adverse Credit History, is also called sub-prime credit history, poor credit history, non-status credit history, bad credit history or even impaired credit history, and is used to refer to a credit history that is judged as being adverse as the applicant has had a history of unsatisfactory financial or credit transactions. This term can also be used to apply to a corporate credit history but is found to be more frequently used in relation to personal credit.

The credit history is constantly tracked by credit rating agencies and they assemble a record of all your borrowing activities or attempts - successful or unsuccessful, track your repayments morale and record any actions taken to recover overdue payments through collection agencies. For individuals these agencies also gather and collate a wide range of personal information.

This information is then sold by these credit agencies to organizations that are considering whether or not to offer credit to the individuals or companies in question.

All the credit agencies usually also offer a supplementary service known as credit scoring which statistically analyses a credit history and assesses the likelihood that a borrower will or will not repay the borrowed money. The higher the score, the better would be the credit history and hence, the higher would also be the probability that the loan will be repaid on time. Chances that the individual with a higher credit score gets a better deal when it comes to a loan are therefore higher.

It however is not the credit agencies that decide whether or not a credit history is adverse. Instead, it is the individual credit companies that make that decision. Each lender has its own credit policy which they utilize to demarcate the level of credit risk that they are prepared to accept and at what interest rate.

In case the applicants' credit score attains a pass level, credit will be offered on the credit company's usual terms, however if the credit score falls below the minimum pass level, the applicant will be described as one having an adverse credit history. Following this, depending upon how low a credit rating the applicant has scored and the credit company's lending policy in effect, the applicant will either be refused, or else offered a lower credit facility, usually offered a higher rate of interest considering the higher risk that the lender is undertaking by providing the loan.