This is a list of some common credit terms. Everyone thinks they
know what a credit report, a credit reporting agency, or Equifax
is, but do they know the real definition of those terms? Not understanding
the true definition for words as common as credit report can sometimes
put you in a bad spot.
A
Annual Fees: A yearly
fee charged for the privilege of using a credit card.
Annual Percentage Rate:
The rate charged for one year of credit.
Applicant: The person
applying for credit, employment, or some other benefit.
Asset: Anything you
own that has a value.
Authorized Account User:
A person authorized by the account holder to use the account.
B
Bankruptcy: A legal
preceding that may release a person from debt. This includes
several version (or chapters): Chapter 7 - total liquidation
of assets, Chapter 11 - business reorganization, Chapter 12
- farm debt, Chapter 13 - repayment plan.
Budget: A financial
plan.
C
Charge Card: A card
that requires payment in full upon receipt of the statement.
Charge Off: A term
used when a creditor doesn't expect to collect on a debt.
Collection Account:
An account, which has been turned over to a collection department
or agency because normal attempts to collect have not been successful.
Consolidation Loan:
Loan obtained to help reduce the amount of payments on bills
owed. This is done by combining the bills into one loan payment.
The borrower then pays off several bills with the proceeds from
the one loan.
Collateral: Property
used to secure a loan or other obligation.
Consumer: Person who
purchases goods and services for their or their family's personal
use.
Consumer Credit Counseling
Service: Usually these are nonprofit organizations that
help consumers find a way to repay debts through careful budgeting.
These organizations often request that creditor accept a longer
pay-off period, which in turn, lowers monthly payments.
Co-Signer: Person who
guarantees that a debt will be paid. If the borrower fails to
meet payment, the co-signer becomes responsible.
Credit: A promise to
pay later for items purchased now.
Credit Card: A card
that's used instead of cash or checks. The borrower then must
repay the credit card company the amount of the purchase plus
any interest that's accrued.
Credit Check: To check
your credit report from a credit bureau.
Credit History: A record
of how the consumer has paid accounts in the past. This is usually
used as a guide to determine whether a borrower is a "good
risk".
Credit Limit: The maximum
amount that can be charged on a credit card or account.
Credit Report: a record
sent to prospective lenders, employers, and insurers that states
the credit standing of a consumer.
Credit Reporting Agency:
A company that gathers information about consumers and sells
it to creditors/employers/insurers.
D
Debit Card: A card
that deducts the purchase price directly from the person's personal
checking account.
Debt Management Programs:
A program in which the creditors are paid off through a plan
worked out by the program.
Debt Reduction Settlement:
A settlement made for less than the full price of a debt. Usually
done through negotiation.
E
Equal Credit Opportunity Act
(ECOA): A federal law that protects consumers' rights
against discrimination.
Equifax: One of the
three major credit reporting agencies.
Experian: One of the
three major credit reporting agencies.
F
Fair Credit Reporting Act:
A federal law that enables consumers to learn what information
credit reporting agencies have on file and allows the consumer
to dispute errors.
G
Garnishment: Legal
seizure of a portion of assets (such as wages, bank accounts,
etc.) in order to repay a debt.
Grace Period: Period
of time in which you can avoid finance charges by paying off
the balance before the due date.
H
Home Equity Loan: A
loan that's based on the amount of equity (the amount paid)
on a home.
I
Installment Loan: A
loan in which the amount and number of payments are fixed.
Interest: The cost
of borrowing (or lending) money. Usually a percentage.
J
Judgment: An official
court decision on an action or suit.
L
Lien: A legal claim
made against a borrower's property in order to secure a debt.
M
Mortgage: A claim placed
against real property in order to secure a debt. 1st Mortgage
- often known as the "primary" has priority over the
claims of other lenders for the same property.
P
Personal Line of Credit:
A maximum amount one can owe at any time.
Personal Loan: A loan
based on consumer's income, debt, and credit history.
Principal: The outstanding
balance of a loan that does not include the interest or other
charges.
Public Record: Information
obtained from court records.
R
Repossession: Surrender
of merchandise required as a result of the inability for a customer
to pay as promised.
Revolving Account:
An account that requires a minimum payment each month plus a
service charge on the remaining balance. As the balance declines,
so does the service charges.
S
Secured Credit Card:
A credit card that's secured by a savings account in which the
credit limit amount has already been established.
T
Trans Union: One of
the three major credit reporting agencies.
