Situational Bad Credit

Situational bad credit is usually caused by a life-altering incident such as a divorce, job loss, or health issue. In this instance, a person with generally good credit suddenly falls behind on their bills, causing their credit score to drop.

Situational credit is unlike habitual bad credit, which is just what the name implies – a person who rarely pays their bills on time, ever.

Individuals with both types of bad credit could have the same credit score, but a subprime lender will look more favorably on the person with situational bad credit since they've exhibited good credit habits in the past.