Credit Repair Glossary

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It's difficult enough figuring out how to repair your credit while learning the jargon at the same time. Below is’s glossary of credit industry terms to help you understand what you’re dealing with and better prepare you to handle repairing your credit and reducing your debt.

Account Condition
An assessment of the current account condition. This does not show the account’s history that led up to its current state, such as: open, paid, charge off, settled, foreclosed, etc.

Account number
The number a creditor gives your account as a unique identifier.

Accounts in Good Standing
Credit items that have a positive status and should reflect favorably on your creditworthiness.

In a Chapter 13 bankruptcy, this represents the percentage of your debt to be repaid to creditors.

Affinity card
A credit card offered by two partners - a lending institution/card issuer and another group, for example, clubs, educational institutions or non-profit organization. Generally, by using this card, you are given special discounts and often a certain percentage of the card’s earnings go to the non-financial partner.

Monthly installments of principal and interest to repay your mortgage. At the end of the agreed upon time (often 15 or 30 years) you become the owner of the property.

Annual Fee
The fee a card issuer assesses for the use of their credit card. The fee is billed annually to your card statement.

Annual Percentage Rate (APR)
A rate of interest measuring the cost of credit. It can be a fixed or variable rate. The rate is determined by calculating the average compound interest rate over the length of the loan.

Payments, usually from an investment or something such as a pension plan, that are fixed and paid at specific intervals. Payments are usually for a specific amount of years or can be unspecified for a lifetime (for example, a pension plan).

An estimate of a property’s fair market value. A lender usually requires an appraisal in order to approve a loan - it ensures that the mortgage loan is consistent with the property value.

A change in the market or some other condition can lead to an increase in the value of an item - appreciation. A decrease in value is a depreciation.

Local taxes assessed to property for specific purposes, such as street lighting.

Any item that you own having value.

When you seek to purchase something that goes above your credit limit, the retailer must receive authorization from the credit card issuer to allow the sale.

Authorized User
The cardholder can grant permission to another person to use the credit card. This party is not generally held responsible by the card issuer for repayment.

Average Daily Balance
The credit card’s average daily balance is calculated by the average of the daily amount you owe (adding charges, subtracting payments), multiplied by the monthly interest rate. Depending on the card, new purchases may be included in the balance; cash advances are usually calculated into the balance.

Balance Transfer
Moving an outstanding credit card balance from one issuer to another.

Balance Transfer Fee
When you transfer a balance from one account to another, your credit card company may change you a fee, usually between 1-5 percent of the balance on the card.

Balloon Payments
Balloon payments require you make one lump-sum payment at the end of the loan.

The payment card your bank issues you.

A method of debt relief where the U.S. Federal District Court legally releases a person from their debt. The Federal government oversees laws regarding the procedures and proceedings used to file for bankruptcy and declare inability to repay debts. There are various “chapters” or methods of relief:

  • Chapter 7 - A liquidation of assets to repay creditors - also known as a straight bankruptcy
  • Chapter 11 - Used by business reorganizations
  • Chapter 12 - Used to declare farm debt bankruptcy
  • Chapter 13 - A repayment plan for wage earners.

Bankruptcy Dismissed
When a bankruptcy is dismissed, a court has denied the bankruptcy petition - the person owing the debt is still held liable for the debt.

Billing Cycle
Creditors sent statements in cycles of about 28-31 days. The interval from one statement to the next is the billing cycle.

When you are approved to receive a loan you become a borrower. After you’ve been approved, you are then obligated to repay the money along with fees as specified by the loan terms.

Brokers help arrange funding or negotiate contracts for clients and receive a fee or commission for their services. Brokers generally do not loan money.

A plan or guideline outlining expenditures (fixed or projected) for a certain amount of time. Often budgets have goals and plans for reaching those goals.

A cap safeguards consumers and usually limits the amount a monthly payment or interest rate can fluctuate.

Capacity is one factor that determines your credit worthiness. Creditors assess your earning ability and continuing income along with the debt you carry when you apply for the credit.

When you are issued a credit card or if you are authorized to use one, you are a cardholder.

Card Issuer
When a financial institution, bank, credit union or company issues (or plays a part in issuing) a credit and/or debit cards, they are card issuers.

Card Reader
Any device that reads the coded strip on credit or debit cards.

Cash Advance
A cash advance is when you get cash from your credit card, bank, or by writing a “convenience check.” There is usually a cash advance fee and you will be charged interest upon receipt of the cash.

Cash Flow
When cash is earned from income-producing property, it is cash flow. Ideally, the cash flow should cover the expenses of the property.

Cash Reserve
A cash amount held in addition to the down payment and closing costs; the lender determines this amount.

Certificate of Eligibility
Qualified veterans can apply for this certificate for Veterans Administration-guaranteed loans for home, mobile homes and businesses. Veterans can apply for these certificates from their local VA office by sending Separation Papers (DD-214) and the request for Certificate of Eligibility (VA Form 1880).

Certificate of Title
A document provided by a qualified source (such as a title company) that shows the property legally belongs to the current owner. Before the title is transferred at closing, it should be free and clear of all liens or other claims.Clear Title
A title that is free of liens.

Charge Card
A specific kind of card that requires full payment of your balance with each billing cycle. Typically charge cards do not charge interest, but late fees can apply if full payment is not received by the due date.

Action of transferring accounts deemed uncollectible to a category such as bad debt or loss.

When a check (or electronic payment) has been deducted from the payer's account and credited to the payee's account.

Closed Date
The date an account was closed.

Closing Costs or Settlement Costs
Customary costs over and above the sale price of the property incurred by buyers and sellers when transferring ownership of a property. Normally include an origination fee, property taxes, survey, deed recording fee, credit report charge, charges for title search and insurance, escrow costs, appraisal fees and other costs assessed at settlement. Closing costs will vary by the area of the country and the lenders used, but usually range between 3 and 6 percent of the mortgage amount.

Co-Branded Card
A co-branded credit card is sponsored both by the issuing bank and a business organization, such as an airline or a department store. Cardholders may get benefits, such as discounts or frequent flyer miles, from the sponsoring merhcnat, based on account usage and terms.

Collection Account
An account owed to a creditor which has been transferred to a creditor's collections department or to a separate professional debt collection agency.

Security pledged for the payment of a loan. Failure to repay the loan means loss of the collateral.

Consumer Credit Counseling Service
A non-profit organization that assists consumers in dealing with their credit problems. Consumer Credit Counseling Service has offices throughout the United States that can be located by calling 800 388 CCCS (2227).

Consumer Reporting Company (or Credit Bureau)
An organization that collects personal financial and other information on consumers, and handles the preparation of reports used by lenders to determine a potential borrower's credit history.

A specified condition that must be met before a contract is legally binding. The two most common contingencies in home purchasing are 1) the house must pass the home inspection, and 2) the borrower must get the loan.

Contract Sale or Deed
A contract between a buyer and a seller which conveys (transfers) title after certain conditions have been met. A form of installment sale.

Conventional Loan
A private sector loan, one that is not guaranteed or insured by the U.S. government.

Person who pledges in writing as part of a credit contract to repay the debt if the borrower fails to do so. The account displays on both the borrower's and the co-signer's credit reports.

Credit Limit

The maximum amount that you can charge on your credit card.

Credit History
History of an individual's debt payment and other financial information. Lenders use this information to gauge a potential borrower's ability to repay a loan.

Credit Limit/Line of Credit
In open-end credit (like a credit card), the maximum amount a borrower can draw upon, or the maximum that an account can show as outstanding.

Credit Report
A report about your credit history that lenders (credit card companies, mortgage companies, loan agents, etc.) consult to determine if and how much money they should lend to you. Your history for making timely payments, any outstanding debt and open lines of credit are all shown on your credit report. Your credit report is available from credit bureaus such as Equifax, Experian and TransUnion.

Credit Risk Score
A statistical summary of the information contained in a consumer's credit report. The most well known type of credit risk score is the Fair Isaac (or FICO) score. This form of credit scoring is a mathematical summary calculation that assigns numerical values to various pieces of information in the credit report. The overall credit risk score is a major part of the information used in the credit underwriting process for a mortgage loan.

A person or firm to whom money is due.

Credit Scoring

Tool used by credit grantors to provide an objective means of determining risks in granting credit. Credit scoring criteria is set by the credit grantor.

The ability of a consumer to receive favorable consideration and approval for the use of credit from an establishment to which they applied.

Some kind of purchase or transaction (point-of-sale purchase, ATM withdrawal, for example) that charges your bankcard account. These transactions debit or take money from your account.

Debit Card
The card that a bank or financial institution issues you that allows you to access funds from your bank accounts.

The document used to establish and transfer ownership of a property.

When you are unable to meet your mortgage terms or make monthly payments on time, you can be in “default.” You can also be in default if you don’t make monthly payments on your credit card accounts or you violate the terms of the agreement in some other way.

When you are unable to make mortgage payments pursuant to your loan agreement; this can lead to foreclosure of your property.

When your account is past due on payments, it is delinquent. Accounts that are past due are categorized into 30, 60, 90 days, etc. delinquent.

The Fair Credit Reporting Act requires that a consumer is provided with their credit history.

Pertaining to your credit report - if you believe there is information that is inaccurate or incomplete on your credit report, you can dispute it with the credit reporting agency.

Down payment
A down payment is not part of the mortgage loan, but is a cash payment for a portion (percentage) of the property’s purchase price.

Electronic Funds Transfer (EFT)
An electronic transfer of funds, such as your ATM transactions, direct deposits, online bill pay or other computer transaction, or point-of-purchase sale.

When you put your signature on the back of a document (endorse), such as a check, you are legally transferring ownership.

Equal Credit Opportunity Act (ECOA)
As required by federal law, lenders and creditors must make credit available to everyone without discrimination based on age, sex, race, color, religion, national origin, marital status or participation in public assistance programs.

Equity is the difference in the real estate value of the property over the outstanding debt against the property.

Escrow account
A separate account into which the lender puts a portion of each monthly mortgage payment. An escrow account provides the funds needed for expenses such as property taxes, homeowners insurance, mortgage insurance, etc.

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 consumer legislation governing the actions of credit reporting agencies.

Fair Debt Collection Practices Act (FDCPA)
Federal consumer legislation prohibiting abusive and unfair debt collection practices.

Fair Market Value
The hypothetical price that a willing buyer and seller will agree upon when they are acting freely, carefully and with complete knowledge of the situation.

Federal Deposit Insurance Corporation (FDIC)

The U.S. government’s independent agency that protects depositors from losses if a bank should fail; depositors are insured up to $100,000.

Federal Home Loan Mortgage Corporation (FHLM)
Also known as “Freddie Mac,” this is a federally-chartered corporation that purchases, converts to securities and sells residential mortgages to investors, providing lenders with funds for new homebuyers.

Federal National Mortgage Association (FNMA)
Also known as “Fannie Mae,” private stockholders own this federally-chartered association, which purchases, converts to securities and sells residential mortgages to investors, providing lenders with funds for homebuyers.

FHA loan
The Federal Housing Administration insures loans that are open to all qualified home buyers.

Fixed rate (fixed APR)
Annual percentage rates (APR) can be fixed - they do not change throughout the year; or they can change after a period of time (such as an introductory APR).

The measurement of time between presenting a check for payment and withdrawing the funds from the account.

In a legal proceeding, the lender or seller can force the sale of a mortgaged property when the borrower fails to meet mortgage terms. A foreclosure is also referred to as “repossession.”

Finance Charge
Finance charges are other costs that can be included when you use a credit card; they are often included in the monthly payment. Typical items that can be included as finance charges are: balance transfer fees, over-limit fees, cash advance fees, late fees or interest-related costs.

Fraudulent Transaction
Any transaction that is made with your bank card without your authorization. Some transactions are cards that are lost or stolen, issued upon a fraudulent application, not received, counterfeit, fraudulent processing or other fraudulence committed as deemed by a card company.

A legal process where a creditor has been awarded a judgement on a debt to receive full or partial payment through seizure of a debtor’s (your) assets, including wages and bank accounts.

Government National Mortgage Association (GNMA or "Ginnie Mae")
The US Dept. of Housing and Urban Development oversees GNMA, a government-owned corporation. GNMA aggregates VA-guaranteed and FHA-insured loans to back securities for private investment; this investment income provides funding to eligible borrowers.

Grace Period
This is the period you have to pay a bill in full to avoid interest fees. Not all credit cards offer a grace period.

If you are responsible for paying a bill, you are a guarantor.

If you promise to pay a debt should the original party not pay on the debt, you are a giving a guaranty.

Home Equity Line of Credit
A loan taken against the equity you have in a property.

U.S. Department of Housing and Urban Development (HUD)
this department was established in 1965 to create livable homes and environments by addressing and improving housing needs and developing communities, as well as enforcing fair housing laws.

Lenders measure the difference between a current interest rate on an adjustable rate mortgage and the rate earned by other investments - the published interest rate is called the index. the index is used to adjust the rate on an adjustable mortgage.

Indexed Rate
The published index rate added to the margin is the indexed rate. Lenders may charge less than the indexed rate for the first year of an adjustable rate mortgage.

Individual Retirement Account (IRA)
This is a type of investment account whose contributions and interest are tax-deferred until retirement. You are able to contribute to this account up to a certain amount each year; if you deduct an amount before retirement, the amount is usually considered taxable income.

A consistent payment that you agree to pay a lender.

Interest can be a fee you pay to borrow money, generally a percentage of the amount borrowed; interest can also refer to the money earned on an investment.   

Interest Accrual Rate

A rate that is used to calculate monthly payments; it can also refer to the percentage rate at which interest accrues on a mortgage.

Interest Rate
Interest rate refers to the rate a lender charges you for borrowing money, usually a percentage of the amount you borrow (loan or credit card). Interest rate can also mean the interest percentage that is charged on a loan.

Introductory Rate
A low interest rate offered by lenders for a certain period of time. After this period ends, the interest rate increases to the indexed rate.

Introductory Period or Intro APR
An introductory Annual Percentage Rate if offered for opening a credit card account and features a lower APR for a certain period of time. After that period, the APR is raised.

A judgement is a decision based on a legal process.

Late Charge or "Late Fee"
A penalty added to your account when a payment is made after a certain number of days beyond the due date.

Late Payment Fee
When a payment is credited after its specified due date, it may incur a late payment fee.

A lien is a legal claim to satisfy a debt; it is a claim of one person on property of another person as security on payments of the debt.

Any asset in cash or any asset that is easily converted into cash.

Money (or principal) that is borrowed and typically repaid with interest.

Magnetic Stripe
The magnetic stripe on the back of credit or debit cards that contains coded information; the information on the stripe is read when your card is swiped through the card reader. Information that is required to complete electronic transactions (customer, account information) is stored on the stripe.

Market Value
Although the market value on property may be different at different times, it is generally the highest price a buyer would consider paying and the lowest price a seller would consider accepting.

The date when the principal balance of a loan is due.

Minimum Payment
The lowest payment you can make on your credit card statement each month to keep your account in good standing.

Money Market Account
Usually requiring a minimum balance, a money market account is a savings account that earns interest while limiting your monthly transactions.

The legal agreement where a loan in granted to buy real estate when the property also serves as the collateral for the loan.

A note is a legal document binding the borrower to repay a mortgage loan with a specific interest rate within a specific period of time.

Usually a written document where a buyer offers a certain purchase price to the seller of a property.

Opt Out
The option to notify marketers, list aggregators and credit reporting agencies to remove your name from all future lists.

A balance on a credit card that surpasses its credit limit.

A security device that allows you to choose an alpha-numeric (and often symbols) combination that you can use to access a system or account.

Payment Status
A system that shows the history of an account for the previous seven years, including negative conditions. Some status are: current, delinquent 30 or delinquent 90.

Penalty for Early Withdrawal
The penalty charged against a certification of deposit if you withdraw money before the end of the term.

Periodic Rate Cap
Regardless of the index, a periodic rate cap limits the amount an the interest rate can increase or decrease within any one adjustment period.

Personal Loan
Generally unsecured (no collateral), a personal loan is based on your income, debt and credit history.

Point-of-Sale (POS)
The “check out” area within an establishment where you pay for good or services the retailer provides.

Points (Loan Discount Points)

A prepaid interest amount that the lender assesses at closing. One point equals 1 percent of the loan.

Power of Attorney
A legal document that authorizes one individual to legally act on behalf of another.

A commitment a lender makes to a prospective borrower that remains in tact as long as the borrower meets the qualifications of the lender.

When you pass an initial credit agency evaluation, you may be come a pre-approved potential customer.

When a lender informally assesses the maximum loan amount you would be able to borrow.

Prime Rate
A prime rate is the interest rate that banks use when they grant loans to very creditworthy customers. Prime rates generally do not change often.

The principal is the amount of your loan not including interest or other fees. It can also refer to as the balance of your loan not including interest or fees.

Private Mortgage Insurance (PMI)
When a borrow cannot meet the 20 percent down payment on a property purchase, some lenders allow a smaller down payment, but with private mortgage insurance - the borrower must carry and pay for this. Generally the PMI has an initial premium payment with possible monthly fees.

Public Record Data
Part of your credit report that reports on tax liens, lawsuits and other judgements relating to your debt.

A printed record of a transaction at the point-of-sale. Generally the receipt shows what the transaction was: the date, time, merchant name and location, part of or the entire account number, transaction number, and the amount of the transaction.

Recent Balance
Pursuant to a creditor’s report, this is the most recent balance that you owe on your account.

Recent payment
Pursuant to a creditor’s report, this is the most recent payment made to your account.

Recurring Billing
When you give a merchant permission to charge your account at regular intervals for purchase of goods or services.

The process of attaining a loan in order to pay off another; this is usually done when the second loan offers better financing terms than the original loan.

Request for Your Credit History
Often a prospective creditor, employer or other entity may request information about your credit history.

Risk Scoring Models
A tool that creditors use to assess future payment habits and determine creditworthiness.

Savings Account
A liquid deposit account that pays interest.

Second Mortgage
A mortgage that is made after an original mortgage.

Secured Credit Cards
Secured credit cards require some form of collateral or deposit of funds; you can charge only up to the amount of the collateral or deposit. Secured credit cards may be used when you have no credit, poor credit or are trying to repair your credit.

Refers to stocks and bonds.

Property, real or personal, that a borrower pledges for the duration of a loan. The creditor can assume ownership of the collateral if the borrower fails to repay the loan.
The property pledged as collateral for a loan.

Security Alert
If you become a victim of identity theft and after you notify credit bureau’s of this, your credit report is flagged with a security alert about possible fraud.

Service Charge
Some types of finance charges have an additional fee called a service charge.

When you come to an agreement with a creditor to repay a part of your original debt.

The document that financial institutions issue (usually monthly) that shows all the transactions for an account. Transactions that are listed may be checks, transfers, deposits, withdrawals, fees, other charges and interest.

Stop Payment
A stop payment order usually happens after you have given a check to someone and before the check has been paid, authorizing the bank not to pay the amount on the check.

Stored-Value Card
An example is a gift card; the card looks similar to a credit card and a computer chip contains information about the value of the money stored. Some stored-value cards are reloadable and can be reused after you have transferred additional funds to the card.

A type of investment that is free from taxes until you draw cash on the investment.

This word refers to the time you have to repay a loan. It can also refer to the period of time you keep funds in an account without withdrawing on the funds.

The document that shows you own a property as stated on the document.

Transaction is a general term that can refer to:

  1. An agreement between parties that sets forth legal obligation and carrying out that obligation.
  2. Any activity that affects a deposit account (deposit, withdrawal, overdraw, etc.)
  3. Any activity causing a change in assets, liabilities or net worth of a business entity.
  4. Any activity that affects a cardholder’s account.

Transaction Fee
A type of fee that is charged against your account whenever you use your credit line.

Analyzing a loan application that determines the risk involved in granting the loan. It can include reviewing the prospective borrower’s credit history and property value. The appropriate rate, term and loan amount can be assessed after review.

Unsecured Credit
Also called a “signature loan,” these types of loans require no collateral.

Unsecured Credit Cards
Unsecured by collateral, these types of credit cards require you to qualify for it based on your credit history, financial strength and earnings potential.

"Upside Down"

This term means that you owe more on your house than it is worth. The market value of the house may have declined or the loan amount may have risen or both in order for a homeowner to be “upside down.”

VA Loan
Typically granted if you have served in the military, this is a long term, low or no down payment loan that is guaranteed by the Dept. of Veterans Affairs.

Variable Interest Rate
Also known as a floating rate; the APR on variable-rate cards changes when economic indicators change (such as a change in interest rates).

Confirming whether information on a credit report is correct or not. You may begin a verification process when you need to question or dispute information on your credit report.

When a settlement transaction that has not yet been settled is nullified.

Void Transaction
When transaction information is deleted.


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