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Terms
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Definitions
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A
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Annual Fees
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A yearly fee charged by credit grantors for the privilege of
using a credit card.
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Annual
Percentage Rate
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The cost of credit at a yearly rate.
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Applicant
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A person applying for credit privileges, employment or some
other benefit.
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Asset
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Any thing you own that has value or use.
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Authorized Account User
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The person authorized by the contractually responsible party to
use the account.
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B
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Bankruptcy
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A
proceeding in U.S. Federal Court that may legally release a person from
repaying debts owed. The law contains several chapters which relate to
different methods of relief:
Chapter 7 - Straight Bankruptcy (total liquidation of assets)
Chapter 11 - Business Reorganizations
Chapter 12 - Farm Debt Bankruptcy
Chapter 13 - Wage Earner Repayment Plan
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Bankruptcy Discharged
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A court order terminating bankruptcy proceedings on old debts.
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Bankruptcy Dismissed
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A court order that denied one's bankruptcy petition making the
debtor still liable for all debts.
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Budget
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A financial plan for saving and spending money.
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C
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Charge Card
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A card which requires payment in full upon receipt of the
statement.
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Charge Off
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Accounting term to indicate that the creditor does not expect to
collect a balance owing on an account.
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Collection Account
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Refers to the status of an account owed to a creditor when it
has been transferred from a routine debt to a Collection Department of the
creditor's firm or to a separate professional debt collecting firm.
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Consolidation Loan
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A loan usually obtained for the purpose of reducing the amount
of the payments of bills owing by consolidating the bills into one loan
payment. The consumer pays off several bills with the proceeds from one loan
and is left with one consolidated monthly payment.
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Collateral
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Property acceptable as security for a loan or other obligation.
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Consumer
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Person who uses and/or buys goods and services for family or
personal use.
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Consumer Credit Counseling Service
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Organizations which help consumers find a way to repay debts
through careful budgeting and management of funds. These are usually
nonprofit organizations, funded by creditors. By requesting that creditors
accept a longer pay-off period, the counseling services can often work out a
successful repayment plan.
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Co-Signer
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Person responsible for repaying a debt if the borrower defaults.
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Credit
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A trust or a promise to pay later for goods or services purchased
today.
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Credit Card
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A rectangular piece of plastic used instead of cash or checks
authorizing payment for goods and services.
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Credit Grantor
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Person or business furnishing consumer goods and/or services on
credit.
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Credit History
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Record of how a consumer has paid credit accounts in the past,
used as a guide to determine whether the consumer is likely to pay accounts
on time in the future.
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Credit Limit
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The maximum amount of money you can charge on a particular
credit account.
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Credit Repair Companies
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Individuals or Companies that promise to "clean-up" or
"erase" your bad credit and give you a fresh start. Also know as
Credit Clinics.
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Credit Report
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A record or file to a prospective lender or employer on the
credit standing of a prospective borrower, used to help determine credit
worthiness.
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Credit Reporting Agency
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A company which gathers, files and
sells information to creditors and/or employers, to facilitate their
decisions to extend credit or to hire.
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D
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Debit Card
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Purchases are deducted directly from the consumer's personal
checking account.
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E
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Equal Credit Opportunity
Act (ECOA)
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A federal law that requires lenders and other creditors to make
credit equally available without discrimination based on race, color,
religion, national origin, age, sex, marital status, or receipt of income
from public assistance programs.
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Equifax
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One of the three major credit reporting agencies, headquartered
in Atlanta,
Georgia.
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Experian
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One of the three major credit reporting agencies, formerly known
as TRW.
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F
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Fair Credit Reporting Act
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A federal law, established in 1971, and revised in 1997, which
enables consumers to learn what information Credit Reporting Agencies have on
file about them, and to dispute inaccurate data in the file. It also
establishes specific permissible purposes for which credit reports may be
requested, and places time limits on how long adverse information may be
reported.
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G
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Garnishment
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Legal process whereas a creditor has obtained judgment on a debt
may obtain full or partial payment by seizure of a portion of a debtor's assets
(wages, bank account, etc...).
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Grace Period
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The period allowed to avoid any finance
charges by paying off the balance in full before the due date.
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H
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Home
Equity Loan
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A
loan based on the difference of the amount you own on your home, and the
home's current market value.
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I
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Installment Loan
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A credit account in which the amount of the payment and the
number of payments are predetermined or fixed.
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Interest
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The cost of borrowing or lending money, usually a percentage of
the amount borrowed or loaned.
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J
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Judgment
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The
official court decision of an action or suit. This public record may be
listed on your credit report in matters of money and debts owed.
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L
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Lease
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A written document containing the conditions under which the
possession and use of real and/or personal property are given by the owner to
another for a stated period and for a stated consideration.
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Lien
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A legal hold or claim of one person on the property of another
as security for a debt or charge. The right given by law to satisfy debt. (A
lien must be paid and released).
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M
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Mortgage
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A
lien or claim against real property given by the buyer to the lender as
security for money borrowed.
1st Mortgage-Also known as the "primary" mortgage-has priority over
the claims of subsequent lenders for the same property.
2nd Mortgage-Also know as the "secondary"
mortgage-is a loan secured by mortgage or trust deed, which lien is
"junior" to another mortgage or trust.
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P
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Permissible Purposes
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As defined in section 604 of the Fair Credit Reporting Act, only
the named reasons for requesting a credit report are deemed
"permissible". Requests not meeting these criteria must be denied.
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Personal
Line of Credit
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The
maximum amount you can owe at any time, based on your income, debt and
your credit history.
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Personal
Loan
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A
loan based on your income, debt and credit history.
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Principal
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The outstanding balance of a loan, exclusive of interest and
other charges.
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Public Record
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Information obtained by the Credit Reporting Agency from court records , such as liens, bankruptcy filings and judgments.
Public records are open to any person who requests to see them.
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R
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Repossession
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Forced,
or voluntary surrender of merchandise as a result of the customer's failure
to pay as promised. There are several types and descriptions of repossession
actions.
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Revolving Account
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An account which requires at least a specified minimum payment
each month plus a service charge on the balance. As the balance declines, the
amount of the service charge, or interest, also declines.
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S
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Secured Credit Card
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A credit card secured by a savings account that has been
established in advance by the borrower. The amount in the account usually
determines the limit on the credit card. These accounts present no real risk
factor for creditors and are therefore much easier to obtain.
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Smart Card
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An electronic prepaid
cash card, usually sold at banks and are exchanged at face
value.
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T
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Trans Union
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One of the three major Credit Reporting Agencies.
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