Impaired CreditCredit Repair Definition
A credit history that includes negative information, making it difficult to obtain new credit or favorable terms.
Definition
Impaired credit refers to a credit history that is damaged by negative information, such as late payments, defaults, collections, charge-offs, repossessions, foreclosures, or bankruptcies. Individuals with impaired credit typically have low credit scores (often considered subprime, generally below 620-670 depending on the scoring model) and find it more difficult to qualify for new loans or credit cards. When they do qualify, they often face higher interest rates, stricter terms, larger down payment requirements, or the need for a co-signer. Impaired credit signals to lenders that the borrower poses a higher risk of defaulting on future obligations. Rebuilding impaired credit requires time and consistent positive credit behavior, such as making on-time payments and managing existing debt responsibly.
Frequently Asked Questions
What causes impaired credit?
Common causes include: missing loan or credit card payments (delinquencies), having accounts sent to collections, defaulting on loans leading to charge-offs or repossessions, foreclosure on a home, filing for bankruptcy, high credit utilization ratios, and too many recent applications for new credit.
How can I get credit with impaired credit?
Options may include: secured credit cards (requiring a cash deposit), credit-builder loans (like cash-secured loans), loans from credit unions (which may be more flexible), obtaining a co-signer with good credit, or seeking loans specifically designed for individuals with subprime credit (though these often have very high interest rates). Focus on improving your credit habits simultaneously.
How long does it take to repair impaired credit?
Repairing impaired credit takes time and consistent effort. Most negative information remains on credit reports for seven years (bankruptcy up to 10). While the impact lessens over time, significant improvement often takes several years of positive credit behavior, including paying all bills on time, reducing debt balances, and avoiding new negative marks.
Need Credit Help?
Discover tools and resources to help improve your credit score and financial health.