Terms

Definitions

A

Annual Fees

A yearly fee charged by credit grantors for the privilege of using a credit card.

Annual Percentage Rate

The cost of credit at a yearly rate.

Applicant

A person applying for credit privileges, employment or some other benefit.

Asset

Any thing you own that has value or use.

Authorized Account User

The person authorized by the contractually responsible party to use the account.

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B

Bankruptcy

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

Bankruptcy Discharged

A court order terminating bankruptcy proceedings on old debts.

Bankruptcy Dismissed

A court order that denied one's bankruptcy petition making the debtor still liable for all debts.

Budget

A financial plan for saving and spending money.

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C

Charge Card

A card which requires payment in full upon receipt of the statement.

Charge Off

Accounting term to indicate that the creditor does not expect to collect a balance owing on an account.

Collection Account

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.

Consolidation Loan

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.

Collateral

Property acceptable as security for a loan or other obligation.

Consumer

Person who uses and/or buys goods and services for family or personal use.

Consumer Credit Counseling Service

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.

Co-Signer

Person responsible for repaying a debt if the borrower defaults.

Credit

A trust or a promise to pay later for goods or services purchased today.

Credit Card

A rectangular piece of plastic used instead of cash or checks authorizing payment for goods and services.

Credit Grantor

Person or business furnishing consumer goods and/or services on credit.

Credit History

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.

Credit Limit

The maximum amount of money you can charge on a particular credit account.

Credit Repair Companies

Individuals or Companies that promise to "clean-up" or "erase" your bad credit and give you a fresh start. Also know as Credit Clinics.

Credit Report

A record or file to a prospective lender or employer on the credit standing of a prospective borrower, used to help determine credit worthiness.

Credit Reporting Agency

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

Debit Card

Purchases are deducted directly from the consumer's personal checking account.

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E

Equal Credit Opportunity Act (ECOA)

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.

Equifax

One of the three major credit reporting agencies, headquartered in Atlanta, Georgia.

Experian

One of the three major credit reporting agencies, formerly known as TRW.

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F

Fair Credit Reporting Act

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

Garnishment

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...).

Grace Period

The period allowed to avoid any finance charges by paying off the balance in full before the due date.

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H

Home Equity Loan

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

Installment Loan

A credit account in which the amount of the payment and the number of payments are predetermined or fixed.

Interest

The cost of borrowing or lending money, usually a percentage of the amount borrowed or loaned.

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J

Judgment

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

Lease

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.

Lien

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

Mortgage

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

Permissible Purposes

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.

Personal Line of Credit

The maximum amount you can owe at any time, based on your income, debt and your credit history.

Personal Loan

A loan based on your income, debt and credit history.

Principal

The outstanding balance of a loan, exclusive of interest and other charges.

Public Record

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

Repossession

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.

Revolving Account

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

Secured Credit Card

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.

Smart Card

An electronic prepaid cash card, usually sold at banks and are exchanged at face value.

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T

Trans Union

One of the three major Credit Reporting Agencies.

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