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A bad credit history could prove a major setback where financial transactions are concerned. All banks and other related financial agencies turn to the credit history as back ground checks on the credit worthiness of their customers. In particular, loan sanctions and credit card approvals are determined on the strength of the credit history and what it reveals about the financial status of the person in question. A person can have one of three types of credit scores - the good score, the fair score and a low score. Each type will determine how easily one can access loans and credit cards and what benefits will be made available.

What it means to have a bad credit history

Bad credit is a low credit score. A bad credit history is a result of years of irregular payments and other defaults. The credit history is so designed that it provides the most comprehensive picture possible of the person under discussion. It includes records of bank transactions, bank statements, records of other loans taken, records of financial commitments, and a statement of income and expenditure.

The credit history therefore gives a bank or credit card company official a holistic idea of what the applicants financial status is and whether, based on the information provided, it appears like he or she will be able to make the required payments. Taking a loan-applicant`s statement of income, expenditure and other financial commitments is crucial to determining whether a person is credit worthy or not.

Banks consider those who have bad credit

While the above is true, it is highly unlikely that a person will get the loan amount applied for or the desired type of credit card. The options available to those with a bad credit history are limited. Not all banks entertain applications from people with low credit scores. As far as the bank is concerned such a person represents great risk for the establishment. A person with a history of irregular, late payments is likely to continue the trend. Therefore, banks and credit cards companies are justified for rejecting these applications. However, some banks do sanction loans to people with a bad credit history.

There are some loans which are particularly meant for such people, loans such as the instant approval loan, cash advances etc. These loans may come at a high interest rate and will not be accompanied by as many offers as loans provided to people with good credit scores.