Impaired Credit

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Definition of 'Impaired Credit'

Impaired credit is a term used to describe a loan or other financial obligation that is considered to be at risk of default. This can happen for a number of reasons, such as when the borrower has missed payments, has a low credit score, or is facing financial hardship.

When a loan is impaired, it means that the lender is less likely to be repaid in full. This can lead to the lender taking steps to protect their investment, such as increasing the interest rate or requiring the borrower to provide additional collateral. In some cases, the lender may even choose to foreclose on the property securing the loan.

Impaired credit can have a number of negative consequences for the borrower. It can make it more difficult to obtain credit in the future, and it can also lead to higher interest rates and fees. In addition, impaired credit can damage the borrower's credit score, which can make it difficult to rent an apartment, get a job, or even get insurance.

There are a number of things that borrowers can do to help prevent their credit from becoming impaired. These include making all of their payments on time, keeping their credit utilization low, and managing their debt wisely. If a borrower does experience financial hardship, it is important to contact their lender as soon as possible to discuss options for working through the situation.

It is important to note that impaired credit is not the same as bad credit. Bad credit is a term used to describe a credit score that is below 600. Impaired credit, on the other hand, is a more general term that can be used to describe any loan or other financial obligation that is considered to be at risk of default.

If you are concerned about your credit, it is important to speak to a credit counselor or other financial professional. They can help you assess your situation and develop a plan to improve your credit score.

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