What Is an Adverse Credit History?

Credit scores mean everything in the lending industry and having an adverse one has an impact on more than just your creditworthiness. There is no specific definition of "adverse credit history," because lenders decide this themselves, although a typically poor credit history most likely contains late payments, collection accounts/charge-off and/or a bankruptcy. A poor credit history, however, is not the end of the world, and you can rebound from one eventually.

Identification

Those with an adverse credit history usually have several negative items on their record, such as late payments and defaulted debts. Each lender determines what risk is acceptable for its institution. Usually, a consumer receives the worst annual percent yield once his score falls below 674. Scores below 560 are the most adverse and get "sub-prime" rates.

Effects

If you can find a lender willing to offer credit when you have an adverse credit history, you will typically pay $20,000 to $50,000 more for a mortgage than a borrower with excellent credit. Lenders are not the only ones who look at your credit history. Utility companies, even cellphone providers and cable companies, may charge a deposit to activate your service. They do this because you technically receive a "service credit" since you pay at the end of the month. Employers may use credit history as the tipping point between two equally qualified candidates.

What Can Cause an Adverse Credit History?

How diligent you are at paying bills on time is the most important factor in a credit score, so seriously delinquent payments --- at least 90 days late --- can wreck an otherwise great score. If you had a 780, for example, a 90-day late payment drags your score down to a 645 to 665. Failure to pay a debt that leads to a charge-off or sale to collections agency and bankruptcy are other items a person with an adverse history might have on their credit.

Tip

It is possible to mend an adverse credit history in a hurry. Run a check on yourself, scan the report for errors and dispute the mistake with the credit bureaus. Pay your bills by the due date; your bank probably offers a payment reminder service that alerts you by email or text. When you have disposable income, pay down any outstanding debt.