Credit Dictionary
If credit talk sounds like a foreign language to you, we are here to help with the most comperhensive financial glossary on the web.
Welcome to the myLoanAndCredit dictionary. We have assembled the largest online financial word guide where you will find the definition to most every lending and credit related term.
# - A - B - C - D - E - F - G - H - I - J - L |
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| # | |
| 401(K) | Retirement savings plan sponsored by a company for its employees. Employees contribute a fixed amount to the plan from each paycheck before federal income taxes are taken out. |
| A | |
| Account Review | Review of a consumer's credit history by a creditor. |
| Active Account | An account for which has experienced activity in the last 90 days. |
| Adjustable Rate Mortgage (ARM) | Mortgage loan with an interest rate that changes at regular intervals. |
| Adjustment | Percentage of a debt that is to be repaid to the creditor in a Chapter 13 bankruptcy. |
| Administrative Fee | Fee charged by a lender to cover the administrative costs of processing a loan request. |
| Ad Valorem Tax | The tax based on assessed property value. |
| Alias | A name reported in your credit file that differs from your primary or given name, such as using a nickname. |
| Alternative Mortgage | Any home loan that does not fall into the category of a standard fixed-rate mortgage. |
| Amortization | Reduction of a mortgage loan by regular payments. |
| Amount Due | The minimum monthly payment that must be repaid. |
| Annual Fee | A yearly fee, usually associated with credit cards, paid to the lender. |
| Annual Percentage Rate (APR) | The cost of credit on a yearly (annual) basis. |
| Applicant | Person applying for credit or other services. |
| Appraisal | An estimate of how much a property is worth. |
| Appraisal Fee | Fee paid for a third-party to assess the value of a property. |
| Appraised Value | Property's assessed fair market value. |
| Appreciation | Increase in value. The opposite of depreciation. |
| Asset | Any holding that has monetary value, such as property, automobiles, and other such holdings. |
| Authorized Account User | A person allowed use of credit card by the primary user of that card. Authorized users are not legally responsible for payment. |
| Available Credit | Credit limit minus the current balance. |
| B | |
| Balance | The amount owed to a creditor. |
| Balance Transfer | Moving one credit card balance to another card, usually to take advantage of a lower APR. |
| Balloon Payment | A final payment at the end of a loan that is much larger than the regular payments. |
| Bankruptcy | U.S. Federal Court proceeding that legally releases a person from repaying outstanding debts. |
| Bridge Loan | Loan that is secured by a borrower's current residence to obtain the funds needed to purchase a new home if the current residence will not be sold prior to the purchase of a new home. Also referred to as a "swing loan." |
| Broker | A commissioned agent that represents properties. |
| Budget | Financial plan. |
| Buydown | Process that allows a borrower to obtain a lower interest rate on a mortgage by paying points to a lender. |
| C | |
| Cap | A limit on how much your interest rate or payment can increase or decrease in an adjustable-rate mortgage. |
| Capacity | An estimate of the amount of debt you can bear based on your income in relation to the amount you already owe. |
| Capital | Your current assets, including savings, investments, and property. |
| Cash Advance | A cash loan taken out on a credit card. |
| Cash Out Refinance | Refinance loan that gives the borrower more money than is needed to pay off the existing mortgage. |
| Certificate of Deposit (CD) | Money deposited in a bank or savings and loan for a stated time period and normally paying a fixed rate of interest. |
| Charge Card | A credit card that requires full payment of the balance each month, such as America Express and Diners Club. |
| Charge Off | Used to indicate that the creditor does not expect to collect an outstanding debt from the borrower. |
| Closed Account | An account that has been closed by you or your creditor. Closed accounts remain on your credit report for seven years. |
| Closed-End Loan | A loan in which money is borrowed in one lump sum for a specified period of time. |
| Closing | The point at which the buyer signs the mortgage documents, pays closing costs, and becomes the owner of the property. Also called a settlement. |
| Closing Costs | Expenses that buyers incur in the transfer of ownership of a property. Closing costs may include taxes, attorney's fees, and other costs. |
| Collateral | Property you pledge as a guarantee for a secured loan. If you fail to repay the loan, the creditor can take the property. |
| Collection Account | An account which has been transferred from a debt to a collection department. |
| Collection Agency | A firm assigned by a creditor to collect overdue amounts. |
| Compound Interest | Interest computed on the balance of a loan, in which the balance includes all unpaid interest. |
| Consolidation Loan | A loan obtained for the purpose of reducing payments owed by consolidating the bills into one loan payment. |
| Consumer | Person who uses and/or buys goods and services for family or personal use. |
| Consumer Credit Counseling Service (CCCS) | Organizations that help consumers find a way to repay debts through careful budgeting and fund management. |
| Consumer Debt | Debt incurred for items that aren't considered tangible investments such as credit card debt, car loans, and personal loans made by family members. |
| Consumer Statement | Under the Fair Credit Reporting Act, you have the right to add a consumer statement to your credit file to explain disputed information about your accounts. |
| Convertible Mortgage | An adjustable-rate mortgage that allows the borrower to convert to a fixed-rate mortgage during the loan. |
| Co-Signer | Someone who agrees to share responsibility with the primary applicant for a loan or credit card. A consumer with poor credit may need a co-signer to get a loan or to qualify for favorable terms. Co-signed accounts appear on the cosigner's credit report. |
| Credit | A trust or promise to buy now and pay later under designated terms for goods or services. |
| Credit Application | A written request for credit, generally in a form specified by the lender. Sometimes, an application fee is charged to cover the cost of loan processing. |
| Credit Balance | The total amount owed on a credit card. |
| Credit Bureau | A company that compiles credit histories on prospective borrowers and provides credit reports to lenders. Lenders use these reports when making decisions on extending credit. The three major credit reporting agencies are Equifax, Experian and TransUnion. |
| Credit Card | A card used to make purchases or take out cash loans that requires the user to pay some or all of the outstanding amount each month. Credit cards are differentiated mainly by their terms. |
| Credit Counseling | Professional counseling provided by organizations that help consumers find ways to repay their debt - through careful budgeting and management of money. |
| Credit File | The collection of an individual's credit history, identifying information, and other records maintained by a credit reporting agency. |
| Credit Fraud | A crime that involves using another person's identity (e.g. name, Social Security Number or other personal information) to acquire credit or make purchases. |
| Credit Grantor | Person or business furnishing consumer goods and/or services on credit. |
| Credit History | A record of how a consumer has paid credit accounts in the past. It is used as a guide to determine whether or not the consumer is likely to pay future accounts on time. |
| Credit Limit | The maximum amount of money which can be charged on a particular credit account. |
| Credit Line | The maximum loan amount a consumer can borrow against in an account. As a credit line is partially or fully repaid, the consumer can borrow against the account again. |
| Credit Repair Agencies | Companies that claim they can "clean up" or "erase" a consumer's bad credit. See Credit Repair |
| Credit Report | A report that a prospective lender or employer obtains from a credit reporting agency that displays the manner in which a consumer has met his or her past credit obligations. It is used to help determine creditworthiness of the potential borrower. |
| Credit Reporting Agency | Commonly known as credit bureaus, credit reporting agencies are companies that receive, maintain, and provide information about consumers' credit history. There are three national agencies -- Equifax, Experian, and TransUnion -- mainly responsible. |
| Credit Risk | The likelihood of a consumer to pay back an outstanding debt. |
| Credit Score | A numerical estimation of the likelihood that you'll meet debt obligations. A creditor gets your information from a credit reporting agency and applies a credit scoring model to calculate your credit score. |
| Creditor | A person or business from whom you borrow, or to whom you owe, money. |
| Credit Worthiness | An assessment of a consumer's past credit behavior that allows a potential lender to decide whether or not to extend credit. |
| D | |
| Daily Periodic Rate | A credit card's annual percentage rate divided by 365 days. |
| Debit Card | A card that allows purchases to be deducted directly from a consumer's personal checking account. |
| Debt | Money owed to another party. |
| Debt Consolidation | A strategy sometimes used by consumers to better manage their debt problems. Rather than paying off several separate bills each month, a consumer consolidates his or her debts with a financial institution that will arrange for one lower monthly payment extending over a period of time. |
| Debtor | One who owes a debt. |
| Debt-to-Income Ratio | Your income compared to the debt you owe. |
| Default | Failure to repay a loan or otherwise meet the terms of a loan agreement. |
| Delinquency | Failure to make payments on time. |
| Discharge | To release a debtor from responsibility for a debt, often as a result of bankruptcy. |
| Disclosure | Information that is made available to consumers. |
| Discretionary income | Individual or family earnings not allocated for necessities such as food and shelter. |
| Dismissed Bankruptcy | An instance in which a judge has ruled against a consumer's petition for bankruptcy, sometimes at the consumer's request. Such cases are recorded in the public records section of the consumer's credit report, and the debts covered in the bankruptcy remain outstanding. |
| Disposable Income | Money left over after taxes are deducted. |
| Dispute | To question the accuracy of information on a credit report. Disputes may now be effectively resolved online by notifying Equifax. |
| Down Payment | A sum of money put down to buy a house, car or other large item. This amount is deducted from the balance of the loan that finances the purchase of the item. |
| E | |
| Elderly Applicant | A person over the age of 62. |
| Equal Credit Opportunity Act (ECOA) | A federal law prohibiting lenders from discriminating against applicants for credit. |
| Equifax Credit Report™ | Equifax compiles data from many sources and creates a file that reflects your personal credit history. |
| Equity | The market value of a person's home or real estate, less the value of all existing liens. |
| Experian Credit Bureau | Experian credit reporting agency is one of the major 3 credit reporting agencies. An elaborate record of your credit history is maintained by the credit bureau. |
| F | |
| Fair Credit Reporting Act | A federal law giving consumers the right to learn what information credit reporting agencies have on file about them and to dispute any inaccurate data in the file. |
| Fair Debt Collections Practices Act | A federal law to protect consumers from any harassing or abusive conduct, the use of false or misleading representations or unfair practices in the collection of debts. |
| Federal Deposit Insurance Corporation (FDIC) | A federal agency that insures consumer deposits in a bank or savings and loan for up to $100,000 per account. Deposits include checking and savings accounts and certificates of deposit. |
| Federal Housing Administration (FHA) | A branch of the U.S. Department of Housing and Urban Development (HUD) that ensures low down payment home loans. |
| FICO© Score | A credit score derived from the application of a credit scoring model created by the Fair Isaac Company to a consumer's credit file held by a credit reporting agency. FICO® scores range from the 300s to the 900s, but almost all consumers have a score between 500 and 850. |
| Finance Charge | The cost of a loan expressed as a dollar amount. |
| Finance Company | A company that mainly lends money to consumers who cannot qualify for credit at a credit union or bank. Finance companies generally charge higher rates than other creditors. |
| Fixed Rate | An interest rate that remains constant, regardless of economic indicators. Compare variable rate. |
| Fixed-Rate Mortgage | A mortgage in which the monthly principal and interest payments remain the same throughout the life of the loan. Compare to Adjustable Rate Mortgage (ARM). |
| Foreclosure | The legal process by which a creditor may sell mortgaged property to recover a defaulted mortgage. |
| G | |
| 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.). |
| Good Faith Estimate | A lender assessed estimate of mortgage closing costs. |
| Grace Period | A period of the time in which a borrower can pay off the full balance of their credit account without incurring additional finance charges. |
| Gross Monthly Income | What you earn before taxes are deducted. |
| Growing Equity Mortgage (GEM) | Fixed-rate mortgage that involves scheduled payment increases over a specified period of time. |
| H | |
| Hard Inquiry | An indication on your credit file that a lender has obtained a copy of the report in order to evaluate your loan or credit application. An excess of hard inquiries within a six-month period may lower your credit rating. All the inquiries Equifax makes when you purchase our products and services are soft inquiries. |
| Home Equity Loan | A loan secured by a primary residence or second home to the extent of the excess of fair market value over the debt incurred in the purchase. Interest on a home equity loan may be tax deductible, but if you fail to pay your home equity loan, your home could be sold to pay off the debt. |
| Home Equity Conversion Mortgage (HECM) | Also referred to as a "reverse mortgage", an HECM allows homeowners to convert the equity in their homes into cash that is paid to them in a lump sum or in a stream of payments. |
| Home Equity Line of Credit (HELOC) | A loan secured by your property which is usually in second position to your first mortgage. A HELOC is usually used for large purchases such as a remodel or college tuition. |
| Housing Ratio | Calculation performed by mortgage lenders to determine if a borrower qualifies for a specific loan type and amount. It is calculated by dividing the monthly housing expense (Principal, Interest, Taxes, and Insurance) by the borrower's monthly gross income. Also referred to as a front-end ratio or top ratio. |
| I | |
| Identity Theft | A fast-growing crime that occurs when someone uses your personal information to fraudulently obtain credit. For more information, see how identity theft identity theft strikes. |
| Index | A published interest rate used to establish the interest rate offered on an Adjustable Rate Mortgage (ARM). Some of the most common indices are treasury bills, treasury securities, London Inter-Bank Offering Rates (LIBOR) and the Cost of Funds Index (COFI). |
| Inquiry | An instance in which all or part of your credit file is accessed by a company or individual. There are different types of inquiries. Inquiries stay on your credit report for not more than two years. See also hard inquiry, promotional inquiry, and soft inquiry. |
| 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. |
| Interest Rate | The rate that lenders charge their borrowers for the privilege of borrowing money. |
| Interest Rate Buy-down Plan | An arrangement where a borrower deposits money to an account so that it can be released each month to reduce the interest rate or monthly payments on a loan. |
| Investigation | The process a credit reporting agency undertakes in order to verify credit report information disputed by a consumer. |
| Involuntary Bankruptcy | A bankruptcy instigated by creditors rather than the debtor. |
| J | |
| Joint Account | A credit or loan account held by two or more people. All account holders assume legal responsibility for the repayment of the account. |
| Joint Credit Report | A combined report created by merging the credit files of joint applicants and used by creditors to assess a joint application for credit, usually involving a mortgage. |
| Judgement | A determination by a court of law that, in the case of credit, may require a person to fulfill an obligation -- to pay a debt, for example. When a judgement has been satisfied, the consumer has fulfilled the requirements and is no longer liable. |
| L | |
| Late Fee | A fee attached to a delinquent account. |
| Late Payment | A payment delivered after its due date. Payments that are late by 30 days or more may be reported to credit reporting agencies and added to your credit report. |
| Lease | A contract that allows you the right to use or occupy property over a specific period of time, during which you make regular payments and after which you do not own the property. |
| Lease-Purchase Loan | Mortgage financing option that allow a homebuyers to lease a home with an option to buy. |
| Lender | A person or business from whom one borrows or to whom one owes money. Also referred to as a creditor. |
| Liability | In the context of credit, legal responsibility for the repayment of a debt. |
| 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. |
| Loan | An amount borrowed to be repaid at a later date, with interest. |
| Loan Agreement | A contract that spells out in detail the terms and conditions of a loan. |
| Loan-to-Value Ratio (LTV) | The ratio of the amount of a home loan to the appraised value of the home. |
| London Inter-Bank Offered Rates (LIBOR) | An index used to establish the interest rate of some adjustable rate mortgages (ARMs). |
| M | |
| Margin | The number of percentage points a lender adds to the index value to calculate the adjustable-rate mortgage interest rate at each adjustment period. |
| Maturity Date | The date on which the last payment on a loan is due. |
| Minimum Payment | The smallest payment you can make on a revolving credit account to maintain your account status as being paid as agreed. |
| Mortgage | A loan designed to facilitate the purchase of a home, in which the home itself serves as security for the loan. |
| Mortgage Debts | Includes first mortgages, home equity loans, and any other loans secured by real estate you own. |
| Mortgage Insurance | Insurance provided by a private company to protect the mortgage lender against losses that might be incurred if a loan defaults. Also referred to as private mortgage insurance, or PMI. |
| N | |
| Net Income | Your total income from employment and other sources, minus taxes. |
| No Cash Out Refinance | A refinance loan that only pays off the existing mortgage balance and does not provide excess cash. |
| O | |
| Obsolete Information | After seven years, negative information on your credit report is considered "obsolete" and should automaticallybe deleted from your credit report. The exception is a Chapter 7 bankruptcy, which remains on your report for 10 years. |
| Open Account | An account that is still active or still being paid. |
| Open End Lease | A lease which may involve a balloon payment based on the value of the property when it is returned. |
| Opting Out | Limiting the sharing of information about you to others, such as opting out of credit or insurance offers that were not initiated by you. |
| Origination Fee | The fee a lender charges to process a home loan. It may include the costs to check the applicant's credit report, prepare documents, inspect the property, and conduct an appraisal. |
| P | |
| Periodic Rate | An interest rate expressed in daily or monthly terms. |
| Permissible Purpose | A purpose for which a credit reporting agency may furnish a credit report on you to a third party. Credit reports cannot be furnished unless there is a permissable purpose for the report as defined in Section 604 of the Fair Credit Reporting Act. |
| 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. |
| PITI | Principal, Interest, Tax, and Insurance. |
| Points | Charges levied by a mortgage lender, usually paid at closing. One point equals 1% of the value of the loan. |
| Prepayment Penalty | A fee assessed by a lender when you pay off your loan ahead of schedule. The penalty compensates the lender for interest payments it would have received based on the loan's payment schedule. |
| Primary User | The person under whose name a credit card account is listed. A primary user can authorize other people to use the account, but the primary user is ultimately responsible for repaying all charges. |
| Prime Rate | The interest rate charged by banks on loans to the largest and highest-rated customers. |
| Principal | The outstanding balance of a loan, exclusive of interest and other charges. |
| Private Mortgage Insurance (PMI) | Insurance that protects the mortgage lender against losses that might be incurred if a loan defaults. |
| Promotional Inquiry | A type of soft inquiry made to your credit report for the purpose of disclosing that a credit report was furnished in connection with a preapproved offer. |
| Public Record | Information obtained by a Credit Reporting Agency from court records such as liens, bankruptcy filings and judgments. |
| Q | |
| Qualifying Ratio | The ratio of your monthly expenses to your gross monthly income. Creditors use qualifying ratios to evaluate loan applications. |
| R | |
| Rate Lock | An guarantee by the lender that the interest rate will stay the same, provided that the loan closes within the specified period of time. |
| Refinancing | Restructuring your home loan to get a lower interest rate or to borrow money from the amount you've already paid on a loan. |
| Repossession | Forced or voluntary surrender of merchandise as a result of the customer's failure to pay as promised. |
| 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 interest also declines. |
| Revolving Balance | The total balance of all revolving credit accounts. |
| Revolving Charge Account | An account that requires at least a specified minimum payment each month plus a service charge on the balance. As the balance declines, the amount owed for the service charge, or interest, also declines. |
| Right of Rescission | A borrower's right to cancel a contract within three business days. |
| S | |
| Savings Account | Money kept in a bank or savings and loan association for safekeeping. Savings accounts earn interest on all money kept in the account. |
| Savings Bond | A government bond that earns interest, issued in face value denominations from $50 to $10,000. Interest on the bond accumulates tax free. |
| Second Mortgage | A mortgage taken out on a home that has an existing mortgage. |
| 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. |
| Secured Loan | A loan for which an item of property has been pledged in case of default. A mortgage is an example of a secured loan. |
| Service Charge | Additional services applied to an account. |
| Simple interest | Interest computed on the principal balance outstanding as long as any portion remains unpaid. |
| Smart Card | An electronic prepaid cash card, usually sold at banks and exchanged at face value. |
| Soft Inquiry | When your credit report is accessed without affecting your credit rating. Soft inquiries include your own requests for your credit report, promotional inquiries by credit card companies, and "checkup" inquiries by your existing creditors. |
| Step Mortgage | Type of adjustable-rate mortgage that allows for the interest rate to increase according to a specified schedule. |
| T | |
| Tax Lien | A charge upon real or personal property for the satisfaction of debts related to taxes |
| Term | The amount of time in which a loan must be repaid in full. |
| Title | A legal document that provides evidence of property ownership. |
| Tradeline | A credit industry term for an account listed on a credit report. |
| TransUnion | One of the three major national credit reporting agencies. |
| Treasury Index | Index that is used to determine interest rate changes for some adjustable-rate mortgage (ARM) programs. |
| Truth in Lending Act | Part of the Consumer Protection Act, the Truth in Lending Act requires lenders to disclose the annual percentage rate and the total cost of the loan, among other things. |
| U | |
| Underwriting Fee | Fee charged by some lenders to cover the cost of the lender's analysis of the risk associated with a loan. |
| Unsecured Loan | A loan based on your promise to repay instead of collateral. |
| V | |
| Vacated | A judgement that has been rendered void or set aside. |
| Variable Interest Rate | An interest rate that changes according to a formula based on an economic indicator such as the prime rate. |
| VA Loan | A mortgage for veterans and service persons. |
| Voluntary Bankruptcy | Bankruptcy filed at the consumer's request. |
| W | |
| Wage-Earner Plan | The three- to five-year repayment schedule in a Chapter 13 bankruptcy. The consumer must turn over disposable income to a bankruptcy trustee, who in turn repays creditors. |
| Writ of Replevin | A court document authorizing repossession of a debtor's property. |
| Y | |
| Yield | The percentage rate of return paid on a stock in the form of dividends or the effective rate of interest paid on a savings or money market account or bond. |