What does it mean?
Bad Debt is debt that is not likely to be settled either due to failure in repayment by the borrower or due to no action to recover the debt from the collector. Bad Debt is mostly written off as uncollectible, which can impact the borrower’s credit score drastically.
Points to remember
- Bad debts are always a risk for credit agencies as this is an aspect that is inherently associated with the credit industry.
- Bad debts can be produced both by individual borrowers and businesses alike. Even unpaid tax returns can be classified as bad debt and written off for individuals as well as businesses.