Glossary Of Terms

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

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 a bankruptcy petition making the debtor still liable for all debts

Budget - A financial plan for saving and spending money

Charge Card - A card which requires payment in full upon receipt of the billing statement

Collection Account - An account which 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 payments of bills owed 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 design 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 which can be charged on a particular credit account

Credit Repair Companies - Individuals or Companies that promise to “clean-up” or “erase” a consumer’s bad credit and give him/her 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

Debit Card - Purchases are deducted directly from the consumer’s personal checking account

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

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

Garnishment - Legal process whereby 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

Home Equity Loan - A loan based on the difference of the amount of equity paid on a home, and the home’s current market value

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

Judgment - The official court decision of an action or suit. This public record may be listed on a credit report in matters of money and debts owed

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)

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

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 one can owe at any time, based on income, debt and credit history

Personal Loan - A loan based on a consumer’s 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 them

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

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 exchanged at face value

Trans Union - One of the three major Credit Reporting Agencies that keep records of your credit report