可怕 and 恐怖 are what kind of "terrible"? Before heading to town to find something to eat, a friend suggested I should be the one driving the 摩托車. I told my passenger it was illegal for me to drive, but they insisted.

I drove fast, ran red lights where appropriate (we live in the middle of nowhere), and performed other little stunts that do not endanger the passengers and are not obnoxious to bystanders (I can't stand it when people make their engines roar in public just to impress themselves), but are nonetheless invigorating.

My passenger described my driving variously as 很恐怖 and 很可怕. When we returned home I checked my dictionary and both of these words were described as "terrible". As you may know, this word carries ambiguity in English. Do I drive very poorly (not necessarily scarily), frighteningly (not necessarily without skill), or both?

Side-note: The passenger clearly enjoyed it and was laughing without a hint of nervousness, if they seemed seriously frightened I would have driven law-abidingly.
It just means frighteningly/terrifying in your situation. Your passenger is just scared by your little stunts (but he/she may be amazed by your moves at the same time).

恐怖 and 可怕 do not have the meaning of poorly.