B
Bad Credit
A poor credit score as measured by the credit reporting agencies. Bad
Credit is caused by making late payments, missing payments, exceeding
card limits or filing for bankruptcy. Steps can, and should be taken to
repair bad credit. Balance
The outstanding amount owed to a creditor on a particular account.
Balance Transfer
The transfer of one or more credit card balances onto another card,
typically to take advantage of a lower annual percentage rate.
Balloon Payments
A loan with a balloon payment requires that a single, lump-sum payment
be made at the end of the loan.
Bankruptcy
A declaration of the inability to make debt payments under the current
agreed upon terms. Once a bankruptcy has been filed, foreclosures, garnishments,
repossessions, utility cut-offs and debt collection activities are automatically
stayed. Consumers can file Chapter 7 or Chapter 11 bankruptcy.
Bankruptcy Code
The federal laws governing the conditions under which people can declare
bankruptcy and the procedures under which persons claiming inability
to repay their debts can seek relief.
C
Capacity
Factor in determining creditworthiness by comparing a borrower’s
income and the amount of debt the borrower carries at the time the application
for credit is made. While capacity may be considered in a credit decision,
a credit report does not contain information about earning ability or
the likelihood of continuing income.
Chapter 7 Bankruptcy
Chapter of the Bankruptcy Code that provides for court administered
liquidation of the assets of a financially troubled individual or business.
Chapter 11 Bankruptcy
Chapter of the Bankruptcy Code that is usually used for the reorganization
of a financially troubled business. Used as an alternative to liquidation
under Chapter 7. The U.S. Supreme Court has held that an individual
may also use Chapter 11. Terms of contracts can be renegotiated under
Chapter 11.
Chapter 12 Bankruptcy
Chapter of the Bankruptcy Code adopted to address the financial crisis
of the nation’s farming community. Cases under this chapter are
administered like Chapter 11 cases, but with special protections to
meet the special conditions of family farm operations.
Chapter 13 Bankruptcy
Chapter of the Bankruptcy Code in which debtors repay debts according
to a plan accepted by the debtor, the creditors and the court. Plan
payments usually come from the debtor’s future income and are
paid to creditors through the court system and the bankruptcy trustee.
Charge Card
A form of credit card that requires full payment of the balance each
month. Such cards nevertheless appear on your credit report, since they
do extend credit to you, even though it is for only a short amount of
time. Examples include American Express or Diners Club cards.
Charge-Off
Action of transferring accounts deemed uncollectible to a category such
as bad debt or loss. Collectors will usually continue to solicit payments,
but the accounts are no longer considered part of a company’s
receivable or profit picture. This is used when an instance in which
a consumer is seriously delinquent in with payments and the creditor
elects to transfer the account to an accounting category that reflects
the debt as a loss on the creditor’s accounting books. Charge-Off
accounts are typically sent to a collection agency and are reported
to the major credit reporting agencies.
Civil Action
Any court action against a consumer or business in order to obtain money
they feel the defendant owes them. Examples include a wage assignment,
child support judgment, small claims judgment or a civil judgment.
Claim Amount
The amount awarded in a court action.
Closed Date
The date an account was closed.
Closing Costs
Expenses that buyers incur in the transfer of ownership of a property.
Closing costs may include taxes, origination fees, attorney's fees,
and other costs.
Co-maker
A creditworthy co-maker is sometimes required in situations where an
applicant’s qualifications are marginal. A co-maker is legally
responsible to repay the charges in the joint account agreement.
Consumer
An individual who purchases products and services.
Consumer Debt
Debt incurred for items that aren't considered tangible investments
such as credit card debt, car loans, and personal loans.
Co-signer
A person who pledges in writing, as part of a credit contract, to repay
the debt if the borrower fails to pay the debt in full. The account
displays on both the borrower’s and the co-signers credit reports.
Credit
The borrowing capacity of an individual or company, typicaly based on
their ability and history of repaying loans.
Credit Agency
See Credit Bureau.
Credit Bureau
Commonly known as credit bureaus or credit reporting agencies, credit
bureaus are companies that receive, maintain, and provide information
about consumers' credit history. The three major agencies are Equifax,
Experian, and TransUnion. There are also many smaller agencies; however,
most of them get information from one or more of the three major agencies.
Credit Card
A card used to make purchases or take out cash loans that require the
user to pay some or the entire outstanding amount each month. Credit
cards are differentiated mainly by their terms.
Credit History
A record of how a consumer has (or has not) made payments on credit
accounts in the past. An individual’s credit history is considered
to be the best guide in determining whether or not the consumer is likely
to pay future payments on time.
Credit Limit
The maximum amount a borrower can draw upon or the maximum that an account
can show as outstanding for a particular line of credit.
Credit Items
Information reported by current or past creditors found on credit reports.
Credit scores are calculated based on credit items.
Credit Report
A report on a consumer’s payment history as reported by their
creditors to the major consumer credit reporting agencies. The agencies
provide this information to credit grantors who have a permissible purpose
under the law to review the report.
Credit Risk
The likelihood of a consumer to pay back an outstanding debt on time
or in full.
Credit Score
A numerical estimation of the likelihood that you'll meet debt obligations
used by credit grantors to provide an objective means of determining
risks in granting credit. Credit scoring increases efficiency and timely
response in the credit granting process. Credit scores are based on
a consumers credit history and range from 300 to 800.
Creditor
A company or individual that enables consumers to make purchases on
credit and/or lends consumers money. Sometimes used interchangeably
with lender.
Creditworthiness
The ability of a consumer to receive favorable consideration and approval
for the use of credit from an establishment to which they applied.
D
Daily Periodic Rate
A credit card's annual percentage rate divided by 365 days.
Debt-to-Income Ratio
An individual or companies income compared to their debt owed.
Delinquent
Accounts classified into categories according to the amount of time
a payment is past due. Common classifications are 30, 60, 90 and 120
days past due. Special classifications also include charge-off, repossession,
transferred, etc.
Discharge
A judgment that may be granted by the court to release a debtor from
most of his debts that was included in a bankruptcy. Some debts cannot
be included in the bankruptcy and cannot be discharged. Examples include
alimony, taxes, child support, and liability for willful and malicious
conduct and certain student loans.
Dismissed (Bankruptcy)
When a consumer files a bankruptcy, the court may decide to not allow
the consumer to continue with the bankruptcy. If the judge rules against
the petition, the bankruptcy is known as dismissed.
Dispute (Disputing
items on credit reports)
If a consumer believes an item of information on their credit report
is inaccurate or incomplete, they may challenge, or dispute the item.
The credit agencies will investigate and correct or remove any inaccurate
information or information that cannot be verified. Consumers have the
option of disputing issues online or they may call the telephone number
located on their credit report s for assistance.
E
ECOA
Standard abbreviation for Equal Credit Opportunity Act. (See Equal Credit
Opportunity Act below.)
End-user
A business that receives the report for decision making purposes that
meet the permissible purpose requirements of the FCRA.
Equal Credit Opportunity Act (ECOA)
Federal law, which prohibits creditors from discriminating against credit
applicants on the basis of sex, marital status, race, color, religion,
age, and/or receipt of public assistance.
Equifax
One of the three national credit reporting agencies or bureaus. The
other two are Experian and TransUnion.
Experian
One of the three national credit reporting agencies or bureaus. The
other two are Equifax and TransUnion.
F
Fair Credit and Charge Card Disclosure Act (1971; amended in 1997 and
2003)
Amendments to the Truth In Lending Act that require the disclosure of
the costs involved in credit card plans that are offered by mail, telephone
or applications distributed to the general public.
Fair Credit Billing
Act
Federal legislation that provides a specific error resolution procedure
to protect credit card customers from making payments on inaccurate
billings.
Fair Credit Reporting
Act (FCRA)
Federal legislation governing the actions of credit reporting agencies.
Fair Debt Collection
Practices Act (FDCPA)
Federal legislation prohibiting abusive and unfair debt collection practices.
Finance Charge
The amount of interest you will be required to pay. Finance charges
are usually included in the monthly payment total.
Fixed Rate
An annual percentage rate (APR) that does not change, meaning that the
interest rates do not fluctuate over the life of the loan.
Foreclosure
The legal process by which a creditor may sell mortgaged property to
recover a defaulted mortgage.
Fraud Alert
If you suspect that you're the victim of identity theft or credit fraud,
you may contact the credit reporting agencies and place a fraud alert
on your credit file. Such an alert will prevent new credit accounts
from being opened without your express permission.
G
Garnishment
A legal process whereby a creditor has obtained a judgment on a debt
that allows him to receive full or partial payment by seizure of a portion
of the debtor's assets (wages, bank account, etc.).
Grace Period
The time period you have to pay a bill in full and avoid interest charges.
Generation Identifier
Generation identifiers. Examples include Jr., Sr., II, III and IV.
Gross Monthly Income
What you earn each month before taxes are deducted.
Guarantor
Person responsible for paying a balance.
H
Hard Inquiry
An indication on your credit report that a lender has obtained a copy
of the report in order to evaluate your creditworthiness for a loan
or credit line. An excessive amount of hard inquiries within a six-month
period may lower your credit score; this allows individuals time to
shop around for large purchases such as homes. All the inquiries consumers
make concerning their credit reports and scores are considered soft
inquiries and never affect their credit score.
High Balance
The highest amount that you have owed on an account.
Home Equity
The part of your home you actually own, or the home's current market
value minus the amount you still owe.
Home Equity Loan
A loan secured by using a primary residence or second home as collateral
to the extent of the excess of fair market value over the debt incurred
in the purchase. Interest on a home equity loan may be tax deductible,
but if you fail to pay your home equity loan, your home could be sold
to pay off the debt (foreclosure).
I
Identity Theft
A growing and alarming area in crime that happens when someone uses
your personal information to fraudulently obtain and use your credit.
Credit monitoring and protection is an effective means to detect and
deter identity theft.
Installment Credit
Credit accounts in which the debt is divided into amounts to be paid
successively at specific intervals.
Investigation
The process a consumer credit reporting bureau goes through in order
to verify or correct credit report information that is disputed. The
credit grantor who supplied the information is contacted and asked to
review the information. The creditor will then tell the credit reporting
bureau if the information is accurate as it appears, or they will give
the corrected information to update the credit report.
Interest Rate
The amount charged by a lender over time for borrowing money.
Involuntary Bankruptcy
A petition can be filed by certain credit ors to have a debtor judged
bankrupt. If the bankruptcy is granted, it is referred to as an involuntary
bankruptcy.
J
Judgment Granted
The final determination of a court upon matters submitted to it regarding
the rights and obligations of the parties involved in the lawsuit.
L
Last Reported
The date on a credit report that the creditor last reported information
about the account.
Liability amount
Amount for which a creditor is legally obligated.
Lien
A legal document used to create a security interest in another’s
property. A lien is frequently given as a security for the payment of
a debt and means that the consumer’s property is being used as
collateral during repayment of the money that is owed. Liens can be
placed against a consumer for failure to pay money owed to cities, counties,
states or the federal government. Unpaid taxes are a common reason for
a lien to be issued.
Line of Credit
The maximum outstanding balance a borrower can draw upon for an account.
M
Mortgage Identification Number (MIN)
This number indicates that a loan is registered with Mortgage Electronic
Registration Systems Inc., which tracks the ownership of mortgages.
It will be used to permanently identify a mortgage.
Most Recent Date
The date of the most recent account balance was provided.
N
Notice of Results
When investigations produce changes in credit reports you may request
that credit agencies send the corrected information in your credit history
to eligible credit grantors and employers who reviewed your information
within a specific period of time.
O
Obsolescence
This is how long negative information will stay in a credit report before
it’s not relevant to the credit granting decision. The obsolescence
period is 10 years for bankruptcy and 7 years in all other instances.
However, unpaid tax liens may remain indefinitely, although Experian
removes them after 15 years.
Original Amount
The amount owed to a creditor before interest was incurred.
P
Payment Status
The history of an account, including any delinquencies or derogatory
conditions occurring during the previous seven years. Examples include:
Current, delinquent 30, current was 60, redeemed repossession and charge-off
)
Permissible Purposes
This occurs when a credit report is issued to a third party. Some permissible
purposes are credit transactions, insurance underwriting, court orders,
subpoenas, and written instructions of the consumer.
Personal Statement
A request that a general explanation about the information on your report
be added to your report. This statement remains for two years and displays
to anyone who reviews your credit information.
Potentially Negative
Items
Any potentially negative credit items, judicial rulings or public records
that could possibly have an effect on your creditworthiness.
R
Recent Balance
The most recent reported balance owed on a credit account.
Recent Payment
The most recent reported amount paid on an account.
Released
This means that a lien has been satisfied and no longer applies.
Reported Since
The date the creditor started reporting the account to the credit bureaus.
Repossession
When a borrower has fallen significantly behind in payments and the
creditor retakes possession of pledged.
Request an Investigation
An investigation can be applied for if information on your report is
inaccurate. The credit reporting bureaus will then contact the sources
of the information to check their records at no cost. Incorrect information
will be corrected and any information that cannot be verified will be
deleted.
Request of Credit
History
When a creditor, direct marketer or potential employer makes a request
for information from a consumer’s credit report, an inquiry is
shown on the report. Potential creditors only see credit inquiries generated
by other creditors as a result of an application of some kind. Consumers
see all listed inquiries including those by creditors, marketers and
employment inquiries. According to the Fair Credit Reporting Act, credit
grantors with a permissible purpose may inquire about your credit information
prior to your consent.
Responsibility
Indicates who is responsible for the debt of an account. Examples of
possible responsibilities are single, joint or co-signer.
Revolving Account
Credit that is automatically available up to a maximum limit so long
as a customer makes regular payments. Credit cards are an example of
revolving credit.
Risk Scoring Models
These are logarithmic calculations
A numerical determination of a consumer’s creditworthiness. Tool
used by credit grantors to predict future payment behavior of a consumer.
S
Satisfied
When the court says that a public record is paid in full by a consumer.
Secured Credit
Loan for which some form of collateral has been pledged, examples of
collateral include house or automobile.
Security
Property that a borrower pledges as collateral in the term of a loan.
Should the borrower fail to repay the loan or fall significantly behind
in payments then ownership of the property will be transferred to the
creditor following legally mandated procedures.
Security Alert
A statement that is added to a credit report by a credit agency after
it is notified that a consumer may be the victim of fraud. Security
Alerts remain on credit reports for 90 days and requires that all creditors
request proof of identification before granting credit in that person’s
name.
Service Credit
Agreements with service provider that a service will be provided to
a consumer and the consumer will pay for the services each month. Contracts
may require that payments are made for a minimum number of months, even
if the service is no longer being used. Examples common agreements of
this type are rental properties, utilities and health club memberships.
Settle
An agreement with a lender to repay only part of the original debt.
Source
The business or organization that supplied specific information on a
credit report.
Status
This indicates the current status or state of the account on a credit
report.
T
Terms
The specifics of the debt repayment schedule in a loan agreement with
a creditor. Examples include 48 months, and 60 months.
Third-Party Collectors
Collectors who collect debts for a creditor. Typically a collection
agency.
Transaction fees
Charges for the certain use of your credit line. For example, cash advance
from ATM’s frequently trigger a transaction fee.
TransUnion
One of the three national credit reporting agencies, the other two are
Experian and Equifax.
Truth in Lending Act
Title I of the Consumer Protection Act, a federal law intended to protect
borrowers from unfair lending practices. This act requires that most
lenders disclose the annual interest rate, the total cost of the loan
and other terms of loans and credit sales.
Type
This refers to the category of a credit agreement. Examples include
revolving accounts and installment loans.
U
Unsecured Credit
Also referred to as signature loans, this is when credit is extended
without collateral from the borrower. These loans are granted based
on the credit score and rarely extended to people with poor credit scores.
V
Vacated
When a judgment is rendered void.
Variable Rate
This is a loan or credit line with an annual percentage rate that changes
over time along with the prime lending rate or according to the terms
of the agreement.
Verification
This can be provided by consumers in order to make their case when they
question some information in their credit report. Credit reporting agencies
will use this documentation from the consumer when deciding what information
is correct and what will go on a disputed credit report.
Victim Statement
A statement that can be added to a credit report in order to alerts
potential credit ors that a consumer’s identification has been
used fraudulently in the past. This is a precaution to protect the consumer
who has been a victim of fraud. The statement requires that any potential
credit grantor contacts the consumer by telephone before issuing credit.
It remains in effect for seven years unless the consumer requests that
its removal.
Voluntary Bankruptcy
When a consumer files the bankruptcy on their own, as opposed to being
forced into bankruptcy by a court order.
W
Wage assignment
An agreement in which a lender is permitted to collect a certain portion
of the debtor’s wages from an employer in the event of default
on a loan.
Withdrawn
A decision to not pursue a bankruptcy or lien after court documentation
has been filed.
Writ of Replevin
A legal document issued by a court authorizing repossession of a security. |
