When someone has Bad credit, it means that they've had past failures to keep up with their credit agreements and an inability to get approved for new credit. It also means that they haven't paid their past credit obligations on time, or not at all.
A person's credit account history is collected by companies called credit bureaus (also referred to as credit reporting agencies) and compiled into a credit report. Having lots of negative information, late payments or loan defaults, on a credit report mean that the person has bad credit. That person may have had accounts sent to a collection agency, been charged high balances, filed bankruptcy or had a vehicle repossessed. Bad credit typically occurs when a person has multiple cases of these things in a short period of time. Some negative events only need to happen once to make lenders wary of working with you. This includes things like bankruptcy, repossession, and foreclosure.
The information in your credit report is used to calculate your credit score, a three-digit numerical snapshot of your credit history at any given time. Credit scores generally range from 300 to 850 with lower credit scores indicating bad credit.