Bad credit describes an individual’s credit history and it can indicate that the borrower has a high credit risk. A low credit score signals bad credit and a high credit score is an indicator of good credit. Creditors who lend money to an individual person with bad credit face a greater risk of that individual missing payments or defaulting than creditors who lend to individuals with good credit.
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An individual’s credit history is dependent on many factors, including the amount owed, the amount of available credit and the timeliness of payments. An individual may have bad credit if she does not make timely payments or has defaulted on a loan during a period of time. Having bad credit makes it more difficult or costly to obtain loans, for example mortgages, from financial institutions.