Glossary

Glossary of Credit, Credit Repair, and Debt-Related Terms

The credit repair and debt-related terminologies are in alphabetical order.

Application Scoring:

In this case a statistical representation is used to estimate and ‘score’ credit applications as well as the data of the credit bureau to judge probable future performance. The scores help business organizations take decision while accepting or rejecting an application.

Balance Transfer:

This is the procedure of moving an outstanding from one credit card Company to a new.

Balance Transfer Fee:

This is the amount of money taken from the cardholder when the outstanding is transferred from a credit card to a new one.

Bankruptcy:

This is a procedure in the United States Bankruptcy Court that may lawfully liberate an individual from paying his debts. A bankruptcy reflects on your credit score for 7-10 years.

Cash Cards:

This is like a prepaid phone card. This has a cash value and is debited on use. If stolen, this can be used by the crook. This cannot be canceled which is possible when it comes to a credit card.

Charge-Off:

This is the balance on a credit transaction which the creditor no more expects you to repay and writes it off as a bad debt.

Co-Branded Card:

This is the credit card issued by a Brand and the bank under its name. Both the brands are reflected on the card.

Collection:

This is the attempt by the debt collection agencies to collect a previously credited amount of a debt obligation.

Consumer Credit File:

This is a credit bureau report prepared on an individual. This includes the name, address, social security number, history of credit, records of collection, public records for example tax liens and bankruptcy filings.

Credit Available:

This is the balance between your credit limit and the amount you have already spent. This amount keeps changing along with the balance.

Credit Bureau:

This is a credit report agency which is a storehouse for information on the credit ratings of an individual or a firm. This is often termed as “credit repository” or a “consumer reporting agency”. The three largest credit bureaus in United States are the Equifax, TransUnion and Experian.

Credit Bureau Risk Score:

This is a score maintained with the resources from the three chief credit bureaus. This gives a clear picture of a consumer’s credit risk and the capability to repay debt.

Credit History:

This is the documentation of how a debtor has dealt with his previous debts.

Credit obligation:

This is a contract by which a consumer is lawfully bound to repay the borrowed money or the credit that has been used already.

Credit Report:

This is the information exchanged by a credit reporting firm which is available on a debtor’s credit standing. The majority of credit reports consist of: consumer name, address, inquiries, credit record, collection records, and any public records like bankruptcy filings or tax liens.

Credit Risk:

This is the chance that an individual will repay his or her loan as agreed upon or not. Debtors who are expected to pay as agreed are less risky to creditors.

Credit Score:

This phrase is used to refer to credit bureau risk scores. It generally refers to a number generated statistically and is used in objectively assessing information that helps in taking a credit decision.

Credit Insurance:

This is a plan generally offered by a third party that covers at least the smallest payment (often for a limited amount of time) in case the cardholder loses a job, passes away, or is disabled.

Daily Periodic Rate:

This is just the yearly percentage rate divided by 365 i.e. the number of days in a year (frequently referred to as the ‘daily interest rate’).

Default:

A default is an unsuccessful payment of a debt on the due date. Usually an account is considered to be “in default” when it stays delinquent for several successive 30-day billing cycles.

Delinquent:

This is the failure to make a minimum payment on a loan or debt payment on or before the time decided. Since most creditors have monthly payment cycles the accounts are generally referred to as 30, 60, 90 or 120 days delinquent.

Equal Credit Opportunity Act (ECOA):

The Federal law prohibits favoritism in credit. The ECOA first came to action in 1974 as Title VII of the Consumer Credit Protection Act.

Fair Credit Reporting Act (FCRA):

The Federal law promotes the confidentiality, accuracy and proper usage of information in each file of the “consumer reporting agency”. The FCRA came to action in 1970.

FICO Scores:

The Credit Bureau Risk Scores are formed with the help of the models created by Fair Isaac Corporation and are called FICO scores. These scores are used by creditors and others to judge the credit risk of potential borrowers or existing debtors. Proper credit and marketing decisions are the results of this score. The information obtainable on credit bureau reports result in derivation of these scores.

Fixed Interest Rate:

A charge (usually 1% to 2%) is imposed by the credit card issuer, based on the expenditure, when a cardholder uses the credit card outside United States. This is termed the fixed interest rate.

Finance Charge:

This is a kind of interest rate that is permanent and does not change with any other factors. For example an interest rate of 10% does not change during the period agreed upon by the credit card company and the cardholder.

Inquiry:

This is an entry on a consumer’s credit report which tells you that someone with a “permissible purpose” (under FCRA rules) has formerly requested for a duplicate of the consumer’s report. Fair Isaac Credit Bureau Risk Scores consider only inquiries pertaining to and resulting from a consumer’s loan request.

Installment Debt:

This is a debt to be repaid in regular installments over a specific period of time. Car loans and mortgage are examples of installment debt.

Insurance Bureau Score:

This is insurance ranking, based on information stored at the foremost credit bureaus. It provides with a snapshot of a persons insurance risk at a particular point in time. It helps an insurer to work out the fresh and renewal car and homeowner insurance plans.

IVA:

An Individual Voluntary Arrangement or IVA is a UK specific debt solution that offers an alternative to bankruptcy. Creditors are repaid a percentage of what they are owed, often around 60%, over 5 years, interest stops and the agreement is legally binding.

Late Payment:

A late payment is a delinquent payment. It is a unsuccessful payment of a loan or debt on or prior to the time decided.

Pay-down Program:

These are the steps for paying down a credit card balance. At first, discontinue charging on the card and make the standard monthly minimum payment by the due date. Then, after two weeks, send half the amount again, and two weeks later, half again. Keep repeating the half payments on the two-week plan till the balance is paid.

Revolving Debt:

This is the debt owed so that the debtor can frequently use and repay without reapplying each time the credit is used. A Credit Card is an example of revolving debt.

Secured Credit Card:

This is a type of credit card wherein the card holder has to have a savings account in order to secure the line of credit for that card. The savings account has to be maintained at 50%-100% of the actual line of credit.

Warning Signs:

Warning signs are the signals that the credit bureaus search in credit card customers’ credit report. They comprise of frequent late payments, over-the-limit fees, and regular balance transfers.

Workout specialists:

This term refers to representatives from banks who help restructure loans/debt when borrowers are in default.

Zero Balance:

A zero balance reflects on a credit cardholder’s bill when the outstanding balance has been paid and new charges have not been made all through the billing cycle.