Glossary of Credit Terms

Charge-off

An accounting term used to refer to debt that’s been written off as uncollectible by the creditor or lender. Debts are typically charged-off after six months of nonpayment. Though the creditor gets a tax break for charged-off debts, you still have a legal obligation to repay it.

Credit inquiry

A record of someone requesting to view your credit report. There are two types of inquiries. Hard inquiries are made when you put in an application for credit. Soft inquiries are those made by businesses you already have a relationship with, and businesses looking to send promotional offers to you. Checking your own credit is known as a soft inquiry, and does not affect your credit score.

Credit score

A numeric snapshot of your credit history at a point in time. Credit scores generally range from 300 to 850 with higher scores being better.

Credit report

A compilation of your credit history. It lists your credit and loan accounts along with your payment history, credit limit, highest credit card balance for each. Bankruptcies, debt collections, tax liens, and lawsuit judgments also appear on your credit report.

Credit monitoring

A service that alerts you to changes in your credit report including, but not limited to, new accounts, new credit report inquiries, new public records, address changes, and other potentially negative information. Credit monitoring is often used to aid in early detection of identity theft.

Debt

Money that’s owed to someone else.

Default

Nonpayment on a debt.

Delinquency

A failure to make payment by the time it’s due.

Loan

Money that must be repaid. A loan is a type of debt.

Utilization rate

The ratio of your credit limit being used. Also called your credit-to-debt ratio, your utilization rate is calculated by dividing your credit card balances by your credit limits. A high utilization means you’re using a large amount of your available credit and results in a lower credit score.