Colossal Credit Glossary

This is the spot you come to when you need to learn one of those crazy credit jargon. This will include a credit card and credit repair glossary.

Peruse through the glossary below to get the definitions to most credit words:


Credit Glossary

Account Condition – This indicates the current state of the account, but not the payment history of the account that led to its current status.

Account Number – This is a unique number assigned by a creditor to identify the borrowers account with them.

Accounts In Good Standing – This is the status of an account in which credit items have a positive status and reflect favorably on the account owner’s creditworthiness.

Adjustable Rate Mortgage (ARM) – This is a home loan for which the interest rate changes periodically based on a standard financial index. These normally offer lower interest rates with the risk of rated going up in future.

Adjustment – This is a percentage of the debt that is required to be repaid to the credit grantors in a Chapter 13 bankruptcy.

Advance-fee loan – This is a loan calculated by deducting all creditor expenses, including finance charges, before the borrower receives the principal.

Affinity Card – This is a card that is offered jointly by two organizations, one being the credit card company and the other a professional institution, special interest group or other non-bank institution.

Alias – These are the other names that a consumer uses for their financial accounts and is noted on their credit report. These may include their maiden names or variations in the spelling or format of their full names.

Alternative Mortgage – This is any home loan that is not a standard fixed-rate mortgage, such as an ARM, jumbo and reverse mortgages.

Amortization – This is the process of paying of debts in full through installments of the principal and interest earned over a specific period of time.

Annual Fee – This is the fee charged on a yearly basis to keep the credit account open. Some creditors charge this while others do not.

Application Fee – This is the amount a credit grantor may charge in order to process the loan application documents.

Appraisal Fee – This is the amount charged for estimating the value of a property which has been offered as security.

APR (Annual Percentage Rate) – This is the percentage cost of credit calculated per annum, which enables you to effectively compare different loans facilities.

Asset – This is any property, whether tangible or not, that is owned by the borrower and has a cash value. Examples include property, goods, savings or investments.

Automated Clearing House – This is a national network that allows the transfer of funds electronically between consumers, businesses and financial institutions.

Authorized User – This is the person permitted by a credit cardholder to charge goods and services on the cardholder’s account, but who is not liable for the repayment of the debt. This account will be reflected in both credit reports of both the cardholder and the authorized user. In the event that the authorized user wishes to have their name permanently removed from that account, they must notify the credit grantor.

Average Daily Balance – This is the method used to calculate finance charges by adding the outstanding balance on each day in the billing period then dividing this total by the number of days in the billing period. This calculation will also include any payments and new purchases.

Back-End Ratio or Back Ratio – This is the sum of the monthly mortgage payment and all other monthly debt repayments such as credit cards, student loans and car payments, which are then divided by the monthly pre-tax income.

Bad Credit – This defines a poor, damaged credit rating which can result in being denied further credit. Bad credit results form defaulting repayments, late payments, exceeding credit card limits or declaring bankruptcy.

Balance – This is the total amount of debt owed, which includes any unpaid balance from the preceding month, new purchases, cash advances and all finance charges such as annual fee, late fee and interest.

Balance Transfer – This is the movement of a debt balance from one credit card to another, in order to shift the ongoing debt to an account with a lower rate of interest accruing.

Balloon Payment – This is the final larger payment that is made to settle a loan at the end of its term. This amount is larger than the periodic payments.

Bankruptcy – This is a formal legal declaration that you are unable to pay your debts and are as such seeking legal protection from your creditors. The most common bankruptcy protection agreements are the Chapter 7 and the Chapter 13. Deciding to file for bankruptcy is something to be carefully considered because having a bankruptcy on your credit report is very damaging to your credit profile.

Bankruptcy Code – These are the federal laws that govern the conditions and procedures under which persons claiming inability to repay their debts can seek relief.

Bi-Weekly Mortgage – This is a mortgage that schedules repayments every two weeks instead of the standard monthly payments.

Billing Cycle – This is the number of days counted between statement dates. The cycle is usually of 25 days.

Borrower – This is the individual who requests for loan or credit with a promise to repay.

Broker Premium – This is the fee paid to a mortgage broker for his services as middleman between the lender and borrower.

Buy Down – This is a lump sum payment a borrower or a third party makes to a creditor, to reduce the amount of a portion or all of the borrower’s periodic payments.

Capacity – This is the factor that determines creditworthiness, and is assessed by weighing the earning ability of a borrower and their likelihood of continued income, against the amount owed at the time the application for credit is made.

Cardholder – This is an individual who is issued a credit card or any authorized users of a particular credit card.

Cash Advance – This is a cash loan given on a credit card that usually incurs a higher interest than that accruing for purchases. A transaction fee may also be charged, and the grace period may be waived.

Cash-Out Refinance – This is a new mortgage for an existing property for which the borrowed amount is greater than the amount of the previous mortgage. The difference will be given back to the borrower once the loan is closed.

Chapter 7 Bankruptcy – This is the seventh chapter of the Bankruptcy code that provides for the court administered liquidation of the assets of a financially challenged individual or business.

Chapter 11 Bankruptcy – This is the eleventh chapter of the Bankruptcy Code which is used as an alternative to Chapter 7 Bankruptcy, and is applied in the reorganization of a financially troubled business or individual.

Chapter 13 Bankruptcy – This is the thirteenth chapter of the Bankruptcy code that requires debtors to repay their debts according to a repayment plan agreed on by the debtor, the creditors and the court. The repayments will normally come from the debtor’s future income and are paid to the creditors through the court system and the bankruptcy trustee.

Charge-Off – This is a delinquent account such as a credit card debt that the creditor has sold to an independent collection agency. Seeing as they no longer own the debt, the creditor therefore ceases any attempts to collect on the account. A charge-off is very damaging to your credit score.

Civil Action – This is any court proceeding against a consumer instituted for the purpose of regaining money for someone else. This is normally a wage assignment, child support judgment, small claims judgment or civil judgment.

Claim Amount – This is the amount awarded in a court action.

Closed-end Credit – This is generally any loan or credit agreements, in which the amounts advanced, including finance charges, are expected to be fully repaid over a specific period of time. Examples of closed-end credit agreements are real estate and car loans.

Closed Date – This is the date on which an account was closed.

Closing Costs – These are the fees a consumer pays when transferring ownership or borrowing against a property, and will include title, lender and escrow fees that range from 3-6% of the purchase price.

Co-maker – This is a creditworthy individual legally responsible for repayment of the charges in a joint account agreement. Such persons are normally required in situations where the applicant’s qualifications are marginal.

Collateral – Also known as security, this is property that is offered for purposes of securing a loan or other credit facility that becomes subject to seizure upon default.

Collection Account – When an account has gone unpaid for at least 90 days, it goes into collections. This is whereby the creditor consults the services of a collection agency to collect on their debts. Alternatively, the creditor may simply sell this account to the collection agency at a fraction of the debt, which company will then report a separate collection account to your credit report. This is what is known as a collection account and it will be listed twice on your credit report, or as many times depending on whether it is resold to other collection agencies and how many times it is resold.

Combined Loan-To-Value Ratio – This is the total amount borrowed in mortgage debts divided by the fair market value of the property.

Commitment Fee – This is the fee paid by a borrower to a lender in exchange for a promise to lend money on certain terms for a specific period of time. This is often charged in order to extend the loan approval offer for longer than the standard 30-60 days.

Community Reinvestment Act (CRA) – This Act seeks to encourage financial institutions to grant credit facilities for housing, etc in their communities, and especially in low or moderate-income neighborhoods, while still maintaining safe and sound operations.

Consolidation Loan – This is a single loan payment that consolidates all bills owing so as to reduce their total amount.

Consumer Credit Counseling Service – This is a non-profit organization that assists consumers in dealing with their credit issues.

Convenience Checks – These are checks provided by a credit card company that may be used to access available credit. These checks will normally have different interest rates and terms from your standard credit card rates and terms.

Cosigner – This is a second party to a loan who signs and assumes equal liability on the loan.

Credit – This is the right a consumer exercises by deferring payment of debt with the promise that they will pay in future for all purchases or debts they wish to incur at present.

Credit Bureau – This is an organization that stores your credit reports and delivers them for review by any credit card issuer or lender when you apply for credit facilities.

Credit Card – This is a card, plate, or coupon book that allows the consumer to borrow money or buy goods and services on credit.

Credit Counseling – This is a program whereby professional credit counselors give advice to borrowers about how to responsible credit use, leading a debt-free life and general money management.

Credit History – This is a record of past payments made by a consumer which is used to determine the creditworthiness of that consumer in the future.

Credit Item – This is the information reported on a credit report by current or past creditors.

Credit Limit – This is the maximum amount of money that may be charged on a single credit account.

Credit Report – This is a summary of your credit history that provides a look into how you have made payments in the past in order to determine whether or not you will be able to make timely payments in the future.  See What Shows Up On A Credit Report

Credit Score – This is a 3 digit number that represents how much trust creditors may put in you in terms of creditworthiness.

Credit Scoring System – This is a statistical system used to determine the creditworthiness of a borrower by assigning numerical scores to various factors relating to creditworthiness.

Creditworthiness – This is a measure of a borrower’s past and future ability to repay their debts, as well as their willingness to do so.

Okay, well done so far; I know thats a lot of info!

Now that we are through the “C’s” here is

Credit Glossary Part 2

Daily Periodic Rate – This is the figure representing the daily rate of your annual interest rate, expressed as 1/365th of your annual percentage rate.

Date Filed – This is the date on which a public record was awarded.

Date Of Status – This is the date in a credit report on which the creditor last reported information about the account.

Date Opened – This is the date in the credit report on which the account was opened.

Date Resolved – This is the date on which a public record item was completed or satisfied.

Debt – This is the amount of money owed.

Debt Consolidation – This is the process of combining debts into one loan or repayment plan. You can do this with the help of a financial institution or a debt counseling service.

Debt Settlement – This is the process in which a debtor pays an agency to negotiate directly with their creditors in order to have their total debt reduced.

Default – This is the failure by a debtor to fulfill their credit obligations as provided in the credit agreement.

Deferred Payment – This is payment that is postponed to be made at a future date or is extended over a period of time.

Delinquent – This describes an account which has gone unpaid in terms of the minimum loan or debt repayment and the date on which payment was due.  These are usually 30, 60, 90 0r 120 days delinquent as most creditors work with monthly cycles.

Discharge – This is a court decision to grant the debtor release form most of his debt obligations that were included in a bankruptcy. This excludes any debts not included in the bankruptcy such as alimony payments, child support, liability for willful or malicious conduct and student loans.

Disclosure – This is a requirement under the Fair Credit Reporting Act which requires consumers to be provided with their credit history.

Discount – This is an amount deducted from the regular price for consumers who purchase in cash instead of credit.

Dismissed – This is the status of a bankruptcy petition whereby the court decides not to allow the consumer to proceed with the bankruptcy.

Dispute – This is the process by which a consumer challenges an item of information on their credit report as being inaccurate or incomplete.

End-User – This is a business that receives the report for decision making purposes that meet the permissible purpose requirements under the Fair Credit Reporting Act.

Equal Credit Reporting Act (ECOA) – This is a federal statute that prohibits the discrimination of credit applicants on the basis of sex, race, marital status, religion, color, age, and or receipt of public assistance.

Equity – This is also called the lendable value or net value and is the fair market value of a home minus the unpaid mortgage principal and liens.

Expiration Term – This is the definite number of years during which a record will remain on a credit report as provided by the Fair Credit Reporting Act. This ranges from 2-15 years for inquiries and unpaid tax liens respectively.

Fair and Accurate Credit Transaction Act (FACT) – This is federal legislation that provides various regulations for the consumer credit industry including requiring credit bureaus to provide consumers with a free copy of their credit report once every 12 months. This statute also includes new privacy regulations, identity theft protection and dispute procedure requirements.

Fair Credit and Charge Card Disclosure Act – This is an amendment to the Truth In Lending Act that requires the disclosure of the costs involved in credit card plans offered via mail, telephone, or applications distributed to the general public.

Fair Credit Billing Act – This is a federal statute that provides a specific error resolution procedure to protect credit cardholders from making payments on inaccurate billings.

Fair Credit Reporting Act (FCRA) – This is the federal legislation that governs the actions of credit reporting agencies.

Fair Debt Collection Practices Act (FDCPA) – This is the federal legislation that prohibits abusive and unfair debt collection practices.

Fannie Mae – This is the largest mortgage investor. It is sponsored by the government and is an enterprise that purchases mortgages form lenders, bundles these into investments then sells these investments on the secondary mortgage market. Fannie Mae was formerly known as the

Federal Housing Administration (FHA) – This is the division of the Department of Housing and Urban Development (HUD) which provides mortgage insurance and sets standards applicable to construction and underwriting.

FICO Score – This is a specific credit score system developed by the Fair Isaacs Corporation.

File Freeze – This occurs when a consumer requests that the credit bureaus freeze their credit reports, thereby stopping any new credit from being issued in that consumer’s name by blocking lenders, insurers, creditors and other companies from accessing the credit information of that particular consumer. This privilege is reserved to consumers in select states of Texas, California, Louisianan, Vermont and Washington. A $10 fee is payable to each credit bureau required to process the freeze, and such file freezes may also be temporarily or permanently removed at an additional cost.

Finance Charge – This is the total amount in dollars that one pays in order to receive credit.

First Mortgage – This is the primary loan on a real estate property which has priority over all other secondary loans.

Fixed Rate – This is a certain and predetermined rate of interest that is applied to the principal.

Fixed-Rate Option – This is a home equity line of credit financing options which allows borrowers to specify the interest and payments on a portion of their balance, which may be done severally during the lifespan of the loan, and normally at an additional fee.

Fixed Rate Mortgage (FRM) – This is a mortgage whose interest rate remains constant for the entire lifespan of the loan which may last anywhere between 15 to 30 years. Fixed Rate Mortgages usually have higher interest rates than Adjustable Rate Mortgages, but do not face the risk of fluctuating rates of interest.

Foreclosure – This is the legal termination of all ownership rights in the event that a home or real estate owner fails to make their mortgage payments or has otherwise defaulted as provided in the terms of the mortgage agreement. In such a case, the creditor normally a bank or a mortgage company, institutes legal proceedings seeking to force the sale of that property so as to enable the liquidation of equity which will in turn satisfy the unpaid debt.

Fraud Alert – This is activated on suspicion that you have been a victim of identity theft. You may therefore contact the credit bureaus and request them to place a 90-day fraud alert on your credit report so as to alert potential creditors to ensure that they verify your identity before granting any credit.

Freddie Mac – This is affirm sponsored by the government, which purchases mortgages from lenders, pools them with other loans and thereafter sells them to investors.

Front-End Ratio or Front Ratio – This is the calculation of the percentage monthly tax income that goes into the payments of a house. The rule of thumb is that front-end ratios should never exceed 28%.

Garnishment – This is the legal attachment or seizure of a debtor’s assets, such as wages or bank accounts, by a creditor seeking to obtain repayment of their unsatisfied debt.

Ginnie Mae – This is a part of the Department of Housing and Urban Development which purchases mortgages from lending institutions then pools them into securities, after which they are sold to investors. Ginnie Mae is also known as the Government National Mortgage Association.

Grace Period – This is the allowance given to debtors within which they may pay off the full balance of their debts before the due date, without incurring any financial charges.

Graduated Payment – This usually involves negative amortization with repayment terms that call for gradual increases in payments on a closed-end obligation.

Guarantor – This is an individual responsible for paying a bill.

Hard Inquiry – This is a record of a request by a business to review your credit report information in response to your application for credit. Hard inquiries may be in response to applications for credit for loans, cell phones or credit cards and may remain on a credit report for up to 2 years, while negatively impacting the credit score.

High Balance – This is the highest amount that the consumer has owed on their account to date.

High-LTV Equity Loan – This is a particular type of home loan which increases the loan-to-value ration to 125% or more.int he event that the total principal of a loan leaves a borrower with debts exceeding the fair market value of the home, the interest paid n the portion of the loan above such value will not be tax deductible.

Home Equity Loan – This is a loan given on the basis of the difference between the amount owed on a home and its current market value.

Home Ownership and Equity Protection Act – This is legislation designed to discourage predatory lending in home equity loans and mortgages.

Housing Expense Ratio – This is also known as the “front ratio” and is the percentage of a consumer’s monthly pre-tax income that goes towards the house payments. The general rule for the Housing Expense Ration is that it shouldn’t exceed 28%.

Income Verification – This is the requirement of fully documented proof of a credit applicant’s income. Loans that require income verification normally offer lower rates of interest than the “no-income” or “no-doc” verification loans.

Individual Taxpayer Identification Number (ITIN) – This is a nine-digit number that is allocated by the Internal Revenue Service to taxpayers that don’t have a Social Security number, such as non-US citizens. This number may be used in credit and loan applications, as well as for purposes of accessing credit reports.

Inquiry – This is a request for your credit report information or credit score. A “hard” inquiry such as that which is made by creditors or potential creditors will appear on your credit report over a year and damage your credit score as well. On the other hand, a “soft” inquiry such as that made by you or non-creditor entities such as landlords, employers, credit monitoring services companies and bureaus will not affect your overall credit profile.

Installment Account – This is a type of credit facilities whereby the borrower agrees to regularly repay a fixed, predetermined amount of the debt over a specific period. Common examples of such installment accounts are furniture loans, car loans and personal loans.

Interest – This is the amount charged on money borrowed or loaned and is normally represented as a percentage of the total amount borrowed or loaned.

Interest-Only ARM – This is an adjustable rate of mortgage whereby none of the payments are made on the loan principal for the first three years.

Interest Rate Cap – This is the limit on how much a borrower’s percentage rate may increase or decrease at rate adjustment periods and during the lifespan of the loan. Interest rate caps are mainly used in ARM loans where the rates may vary at certain points.

Introductory Rate – This is a temporary, low interest rate offered on a credit card for purposes of attracting customers. This low rate will normally last for up to 6 months before it is converted to a normal fixed or variable rate. In some loan credit card offers, this introductory rate may be revoked or terminated early if the borrower makes a late payment or violates some other term of the account.

Investigation – This is the process by which a consumer reporting agency verifies the credit report information disputed by a consumer. The creditor who supplied the information is requested to review and confirm the accuracy of that information or provide correct information in order to have the report updated. All Americans are allowed to ask for an investigation and one of the first steps to this is knowing the credit laws that protect consumers like you and me.

Investigative Consumer Reports – These are consumer reports that are normally done for background checks, security clearances and other sensitive jobs. These may contain information obtained from a credit report, although it is much more comprehensive than a credit report, as it contains subjective material on the consumer’s character, habits, lifestyle which is obtained through interviews with the consumer’s associates.

Involuntary Bankruptcy – This is a petition filed by a credit grantor seeking to have the debtor adjudged bankrupt and granted by a court.

Item-Specific Statement – This is an explanation about a particular trade or public record item on a credit report, which is displayed with that item on the credit report.

Joint Account – This is an account that is jointly owned by two or more people, who are thereby held equally responsible and liable for payment under the terms and conditions of the loan agreement.

Judgment – This is the official final decision given by a court determining an action or suit. In some case, a judgment may allow a creditor to seize the assets of the defaulter and can be sought by a collection agency that has bought your debt through a charge-off. Judgments may be listed in a credit report.

Jumbo Mortgage – This is a loan that exceeds the limits set by Fannie Mae and Freddie Mac, whose amount usually ranges from $200,000 to 400,000. A jumbo mortgage is also referred to as a non-conforming or non-conventional loan, and normally carries a higher rate of interest than standard loans.

Last Reported – This is the date in a credit report on which the creditor last reported information about the account.

Late Payment – This is a debt repayment that is either made past the predetermined due date or is made 30 days or more after the creditor due date. The severity of late payments increases every 30 days.

Late Payment Charge – This is a fee charged by a creditor or lender when a consumer makes a payment after its due date. This fee normally ranges from $10 – 50.

Lender – This is the individual or financial institution that will be providing the credit or loan facilities.

Liability Amount – This is the amount which a creditor is legally obligated to repay a creditor.

Liability on an Account – This is the legal responsibility to repay a loan or debt.

Lien – This is the legal hold or claim on a debtor’s property such as real estate or motor vehicles, as security for a loan or charge. Collateral for secured loans usually have a lien placed on them which remain until the loan is fully repaid.

Line of Credit – This is an amount of credit given to an individual, institution or business, which is preauthorized and may be secured against an asset such as real estate.

Loan Origination Fee – This is a fee charged by a lender for underwriting a loan. This fee is expressed in points, with a point being 1% of the loan amount.

Loan Processing Fee – This is a fee charged by a lender for accepting a loan application and gathering the supporting paperwork. This fee usually amounts to $300.

Loan-to-Value Ratio (LTV) – This is the percentage of the value of a home, which is financed by a loan. During the refinancing of a mortgage, the LTV ratio is calculated using the appraised value of the home and not its sale price. The best deals are usually for LTV ratios of below 80%.

Location Number – This is the book and page number on which the item is filed in the court records.

Low-Documentation Loan – This is a mortgage that requires less income and/ or asset verification than the standard loans. These low-documentation loans are designed for borrowers that cannot or do not wish to reveal information pertaining to their incomes, such as entrepreneurs and self-employed borrowers.

Low-Down Mortgages – These are secured loans that require a small amount of down payment of not more than 10%, and sometimes also that the borrower purchases mortgage insurance. Low-down mortgages are normally offered to special classes of borrowers such as first-time homeowners, veterans and police officers.

Maxed Out – This is a slang term for the status of a credit card whose entire credit limit has been used up. Borrowing up to the maximum limit on a card or equity line will normally negatively impact the credit score.

Merged Credit Report – This is also referred to as a 3-in-1 Credit report, which details all the credit report information collected from all the three credit bureaus for easier comparison.

Minimum Payment – This is the least amount that a borrower is required to pay towards their debt repayment to the credit card company. This normally ranges from between $10 – 50.

Monthly Periodic Rate – This is the rate of monthly interest payable which figure is arrived at by dividing the annual percentage rate (APR) by 12.

Mortgage – This is a claim or lien made by the lender against the buyer’s real estate which was given as security for the debt.

Mortgage Banker – This is an individual or company that originates home loans then sells these to investors and processes monthly payments. An example is Fannie Mae.

Mortgage Broker – This is an individual or company that matches lenders with borrowers that meet their criteria.  Mortgage brokers do not make direct loans like the mortgage bankers do, but they still receive payment for services rendered.

Mortgage Identification Number (MIN) – This is the number that indicates that a loan is registered with the Mortgage Electronic Registration Systems Inc, which tracks the ownership of mortgage rights. This number will be used to track he homeowner for the period of the mortgage.

Mortgage Interest Expense – This is a term for the interest paid on a loan which is fully deductible, up to certain limits, when income taxes are itemized.

Mortgage Refinance – This is the process of paying off and replacing old loans with new mortgages. Borrowers will normally opt to refinance their mortgages in order to secure a lower interest rate, reduce their monthly payments, and avoid balloon payments or so as to remove their cash from their equity.

Mortgagee – This is the recipient of the mortgage, such as a financial institution.

Mortgagor – This is the grantor of the mortgage on their property, in this case, the borrower.

Most Recent Date – This is the balance date or the date of the recent account condition or payment status.

You are about 2/3 the way through!  Here is

Credit Glossary Part 3

Negative Amortization – This is a repayment schedule which calls for periodic payments that are insufficient to fully amortize the loan.

No-Documentation Loan – This is a mortgage in which the applicant provides minimal information such as their name, Social Security number and address. The loan is decided upon by the underwriter, based solely on the applicant’s credit history, the size of the down payment and the appraised value of the home. This type of loan will usually carry a higher rate of interest than the standard loans do.

Notice Of Results – This is a request by a consumer for their corrected information in the credit history to be sent to eligible creditors and employers who reviewed your information within a specific period of time. This may occur if the investigation results in information being updated or deleted.

Obsolescence – This is describes how long negative information should stay in a credit file before it’s no longer relevant to the credit granting decision. Under the Fair Credit Reporting Act, the obsolescence period for bankruptcy is 10 years and 7 years for all other circumstances. Unpaid tax liens may however remain indefinitely.

Open 30-day Account – This is a type of credit facility whereby the borrower agrees to repay the full amount accruing at the end of each month. Common examples are charge cards for entertainment, travel etc.

Open-end Lease – This is also known as a finance lease and it may involve a balloon payment made on the value of the property when it is returned.

Overdraft Checking Account – This is an account which allows the consumer to write checks for more than their actual balance, with a finance charge on the overdraft.

Opt In – This is the ability of a consumer, who has opted out previously, to later have their name re-added to prescreened credit and insurance offer, direct marketing and individual reference service lists.

Opt Out – This is the ability of a consumer to have their name removed form all future lists by credit reporting agencies, direct marketers and list compilers.

Original Amount – This is the original amount owed to a creditor.

Over-Limit Fee – This is the fee charged by a creditor for exceeding the credit limit set on a credit card. This usually amounts to $10=50.

Past Due – This is the status of an account whose minimum payment has not been rendered on time.

Payment Status – This is a reflection of the previous history of the account, including any delinquencies or derogatory conditions occurring during the previous seven years.

Penalty Rate – This is a higher interest rate that is applied to a credit card account in the event that the borrower has been making late payments.

Periodic Rate – This is the rate of interest applicable to a certain length of time such as monthly periodic rate will denote the cost of credit on a monthly basis.

Permissible Purposes – These are the named and solely permissible reasons for requesting for a credit report as provided under section 604 of the Fair Credit Reporting Act.

Person-to-Person Loan – This is a loan that requests for direct financing for a vehicle rather than applying for the loan through a car dealership. This loan normally applies to auto loans.

Personal Information – This is information on a personal credit report associated with the consumer’s records reported by the consumer, creditors or third parties. This may include name variations, drivers license numbers, Social Security number variations, date and year of birth, telephone numbers, residential address, spouse’s and employer’s names.

Personal Statement – This is a general explanation about the information on a credit report that is added on the report at the request of the consumer. This statement will remain for 2 years and is displayed to anyone who reviews your credit report information.

Petition – This is a request made to a court by a consumer wishing to file for bankruptcy before the judge ahs ruled on whether it may proceed or not.

PITI – This is the acronym for the 4 elements of mortgage payment: Principal, Interest, Taxes and Insurance.

Plaintiff – This is the individual who institutes legal proceedings against a defendant seeking a court decision.

Points – These are the financial charges paid by a borrower at eh beginning of a loan in addition to monthly interest, each point being equivalent to 1% of the loan amount.

Potentially Negative Items – These are credit items or public records that may negatively affect your creditworthiness as viewed by creditors.

Pre-Approval Letter – This is a document from a lender or broker that gives an estimate of how much a potential home owner could borrow, based on the current interest rates and a preliminary examination of their credit history. This letter does not constitute a binding agreement with the lender, and it makes it easier to shop for a home and negotiate with other lenders.

Pre-Payment Penalty – This is a fine imposed by a creditor as penalty for paying off a debt in full before its original due date.

Pre-Qualification Letter – This is a non-binding evaluation of the finances of a prospective borrower in order to determine what amount they can borrow and on what terms. This is a less formal version of the pre-approval letter.

Prime Rate – This is the rate of interest accorded to big, highly-rated clients by financial institutions.  This rate will vary depending on the demand for cash and the rate charged to member banks by the US Federal Reserve Bank.

Principal – This is the outstanding balance of a loan, excluding interest and any other charges.

Private Mortgage Insurance (PMI) – This is a type of insurance that protects lenders by paying the costs of foreclosure on a home in the event that the borrower stops paying the loan. This type of insurance is normally required where the down payment is less than 20% of the sale price of the home.

Promotional Inquiry – This is a form of soft inquiry made about a credit report seeking to disclose that that credit report was provided in connection to a pre-approved offer. A creditor will thus only receive limited information and not your whole credit report, should your credit history match their criteria.

Public Record Data – This is information included as part of the credit report which is limited to tax liens, lawsuits and judgments relating to the consumer’s debt obligations.

Qualifying Ratio – This is the percentage of income that is spent on housing debt and combined household debt as calculated by the lender.

Rate Shopping – This is when a borrower applies for credit from various lenders in order to find the best interest rate for a car loan or a mortgage. This will not have much of an impact on the credit score if it is carried out within a short period of time such as two weeks.

Reaffirmation Agreement – This is an agreement between a lender and a bankrupt debtor to continue paying a dischargeable debt after a declaration of bankruptcy. This is usually done to keep collateral or a mortgaged property from being repossessed.

Re-Aging Accounts – This is the process by which a creditor can roll-back an account record with the credit bureaus, and is normally used in the event that the cardholder requests that late payment records are removed die to their being inaccurate or having resulted from a special circumstance. However, re-aging can be illegally used by collection agencies to make a debt account seem much younger than it is in actual fact. Some collection agencies apply this method to keep an account from expiring from a credit report so as to get the borrower to pay the debt.

Recent Balance – This is the most recent balance owed on an account as reported by the creditor.

Recent Payment – This is the most recent amount paid on an account as reported by the creditor.

Released – This describes a lien that has been satisfied in full.

Repayment Period – This is the period of a loan during which the borrower is required to make payments, and normally applies to home equity lines of credit. During this period, the borrower cannot take out any extra money and must pay down the loan.

Report Number – This is a number that uniquely identifies each credit report and is displayed thereon.

Renegotiable Rate – This is a type of variable rate which involves a renewable short-term “balloon” note. The rate of interest on the loan is normally fixed during the term of the note, but when the balloon becomes due, the lender may opt to refinance it at a higher rate. For the loan to become amortized, periodic refinancing may be required as well.

Repossession – This is the surrender of merchandise, either voluntarily or through force, by a loan defaulter. Repossession may occur where a creditor seizes the item securing the loan then sell it to repay the amount owed.

Responsibility – This denotes who is responsible for an account, whether a single, joint or co-signed account.

Reverse Mortgage – This is a mortgage which allows elderly borrowers to access equity without having to sell their homes, by having the lender make payments to the borrower. The loan is then repaid from the proceeds of the estate when the borrower either passes on or moves away.

Revolving Account – This is an account whose balance or monthly payments may fluctuate. This is a common feature in most credit card accounts.

Revolving Credit – This is a credit facility that allows the borrower to pay all or part of the outstanding balance on a credit card or loan. Then once paid, that credit becomes once again available for use in a subsequent purchase or loan.

Rewards Card – This is a credit card that rewards spending with points, airline miles or cash-back programs. Such cards normally require that the borrower have good credit and will normally have an annual fee charged.

Risk Score – This is another term for credit score.

Satisfied – This is the status of a public record item once a consumer has paid off all the money owed as determined by the court.

Schumer Box – This is an easy to use chart which usually appears on statements and other documents, that explains the fees, rates, terms and conditions of a credit account, which creditors are required to provide to credit applicants under the US Truth In Lending Act.

Scoring Model – This is a complex mathematical formula that evaluates the financial information on a credit report so as to predict the future behavior of the borrower.

Second Mortgage – This is a loan taken out which uses the home’s equity as collateral. During a sale, the first mortgage must be repaid before the second mortgage.

Secured Credit Card – This is a consumer credit account which requires that the borrower produce a form of collateral, normally a cash equivalent of the amount of credit limit on the card. Secured credit cards are easier to obtain than standard credit accounts and are helpful for borrowers with poor or no credit.

Secured Debt – This is a loan that requires a piece of property such as a car or a house to be used as collateral, which provides security to the lender that in the event of failure to repay the debt, the property will be seized.

Secured Loan – This is a loan secured by collateral such as real estate.

Security – This is real or personal property that a borrower pledges for the duration of the term of the loan. In the event of default by the borrower, the creditor may take ownership of such property as provided by the law.

Security Interest – This is the creditor’s legal right to seize all or a part of the property granted as security for the credit facilities.

Seller’s Points – This is the lump sum paid by the seller to a buyer’s creditor in order to reduce the cost of the buyer’s loan.

Service Charge – This is a component of some finance charges, for example a fee for triggering an overdraft checking account into use.

Service Credit – This is an agreement to provide services on credit made by the borrower and credit grantor. Such services may include electricity, health club memberships, rental properties for which the consumer undertakes to pay for on a monthly basis. These contracts may sometimes require payments for a definite period of time even if you stop the service.

Settle – This is an agreement reached with a creditor whereby the borrower is only required to repay a part of the original debt.

Social Security Number (SSN) – This is a unique 9 digit number that is used to track your Social Security savings or used to identify your accounts by lenders, creditors, banks, insurers, hospitals, employers and other businesses. For non-US citizens who don’t have a Social Security number, they are instead issued a 9 – digit Individual taxpayer Identification Number (ITIN).

Soft Inquiry – This is a type of inquiry that does not negatively impact the credit score. A soft inquiry is recorded when a business requests for a credit report for purposes other than an application for credit. Soft inquiries will include your requests to review your credit report or inquiries by prospective employers. A soft inquiry will be recorded by the credit bureaus, but will not normally appear on a credit report purchased by the borrower or a business.

Source – This is a business or organization that supplies certain information that is displayed on the credit report.

Statement – This is the monthly bill issued by the credit card company which summarizes all the activities of an account. This includes purchases, payments, finance charges, balance and other transactions for that month.

Statement Date – This is the date on which a statement is generated and the monthly interest rate is added onto the outstanding balance.

Status – This is the current position of the account as reflected on the credit report.

Subprime – This is a type of financial product targeted to consumer with damaged credit, no credit or low-income earners. Subprime customers are normally those with FICO credit scores of as low as 500 to 620.

Subprime Borrower – This is a borrower who does not meet the qualifications for the standard loan and credit offers. Such an individual normally has a poor credit score rating of below 650, mainly due to collection accounts, making late payments or public records. Lenders will normally grade subprime borrowers based on the severity of their past credit problems, in categories ranging between A to D and even lower. Subprime borrowers may qualify for credit or loans, but normally at higher rates of interest and coupled with special terms and conditions.

Surcharge – This is the extra charge imposed on consumers purchasing goods via credit card instead of cash.

Tax Lien – This is a claim made by a taxation authority against property of tax defaulter.

Teletrack – This is a card reporting system which specifically tracks subprime borrowers or borrowers without official credit. Information is collected on rent payments, loan payments and non-standard lenders in order to develop accurate predictions on risk of borrowers who may not be included in the standard credit reporting system.

Terms – These are the specific obligations provided in a loan agreement that denote the loan term.

Third-Party Collectors – This is a collection agency who are contracted to collect debts on behalf of a credit department of credit company.

Trade Line – This is an account that is listed on your credit report.

Transaction Fees – These are the charges on the use of a credit line such as getting cash advance form an ATM.

Truth In Lending Act – This is Title I of the Consumer Protection Act which requires that most categories of lenders disclose the annual rates of interest, the total dollar cost and other terms of loans and credit sales to the consumer.

Universal Default Clause – This is a credit card policy which allows a creditor to increase the interest rates on a loan or credit, in the event that the borrower makes a late payment on any account, whether theirs or even on an unrelated loan, by tracking the borrower’s  credit history with other accounts through their credit report.

Unsecured Loan – This is a loan issued on the basis of the borrower’s promise to pay back, without providing their savings or any other collateral as security.

Vacated – This is the status of a judgment that has been rendered void or is set aside.

Variable Rate – This is a rate of interest that it likely to fluctuate during the period of the loan. It is often tied t an index reflecting fluctuations in market interest rates, which would in turn alter the amounts or period of the loan term. However, limits are normally placed on how high or low the rate can be set.

Verification – This is the process of checking whether data in a credit report is accurate or not when requested by a consumer.

Victim Statement – This is a statement that may be added to a consumer’s credit report so as to alert credit grantors that the consumer’s identification has been fraudulently used to obtain credit. This statement will request the credit grantor to contact the consumer via telephone before granting credit, and will remain on the credit report for 7 years until the consumer requests to have it removed.

Voluntary Bankruptcy – This is the bankruptcy filed by a consumer on his own volition.

Wage Assignment – This is a signed agreement by a borrower allowing a creditor to collect a certain portion of the debtor’s wages from an employer in the event of default of payment.

Withdrawn – This is the status of a civil proceeding after a decision has been taken not to pursue it any further, after court documents have already been filed.

Writ of Replevin – This is a legal document issued by a court which authorizes the repossession of security.

THATS ALL OF THEM!  I hope you enjoyed this glossary

Now that you have an awesome set of credit vocabulary words in your arsenal with this credit glossary, check out the rest of the blog!

 

About the Author

Jeremy Maher dealt with harassing collector calls, debts piling up and damaged credit for years. He improved his situation and started helping others.   That leads us to today, where Jeremy has DIY solutions for stopping collection harassment, eliminating debt and improving your credit scores. His clients can improve their situation within the comfort of their own home.

Leave a Reply 9 comments