Building Good Credit
Building Good Credit Glossaries
Account Condition: An assessment of current account condition. Condition does not show events that created the current state.
Accounts in Good Standing: Credit items that have a positive status and reflect favorably on creditworthiness.
Amortization: Monthly installments of principal and interest to repay a mortgage. At the end of the agreed upon time the borrower becomes the owner of the property.
Annual Fee: The fee a card issuer assesses for the use of a credit card. The fee is billed annually to the consumer.
Annual Percentage Rate (APR): The true cost of a loan. Determined by calculating the average compound interest rate over the length of the loan.
Asset: Any item owned that has value and can be sold.
Authorized User: Person allowed to use a credit card by the owner of the card. The owner of the card is still responsible for repayment.
Balance Transfer: Shifting an outstanding credit card balance from one company to another company.
Balloon Payment: Lump-sum payment made at the end of the loan term.
Bankruptcy: Legal means of debt relief where a person is released from debt. Chapter 7 proceedings liquidate assets to help repay creditors; Chapter 13 proceedings set up a debt repayment plan.
Billing Cycle: The interval between one billing statement and the next.
Cap: Limit on interest rate or payment amount.
Capacity: The ability of a borrower to repay a loan; calculated by measuring income and current debts.
Cash Advance: Cash received from a credit card, rather than using the card to purchase goods and services.
Cash Flow: Measure of money flowing into and out of a household. When more income is earned than spent, cash flow is positive.
Charge-off: Determining that an account or bad debt cannot be recovered.
Collection Account: An account owed to a creditor that has been transferred to a creditor's collections department or to a separate professional debt collection agency.
Collateral: Security pledged for the payment of a loan. A car may serve as collateral for an auto loan.
Consumer Credit Counseling Service: A non-profit organization that helps consumers deal with credit problems.
Credit Bureau: Organizations that collect personal financial information on consumers; lenders use those credit reports to determine whether or not to approve credit requests.
Co-Signor: A person who pledges to repay a debt if the borrower does not.
Credit Limit: Maximum amount allowed to be charged on a credit card or other revolving credit account.
Credit History: Record of individual debt payments.
Credit Report: Report detailing credit history. Used by lenders to determine whether a potential borrower will qualify for credit.
Creditor: The person or company owed a debt.
Credit Score: Numerical method of determining credit worthiness. The higher the score, the more credit worthy the consumer is considered to be.
Default: When mortgage or loan terms are not met; typically when payments are not made on time. Strictly speaking, default means the terms of the agreement were not met and the lender may take further action.
Delinquency: When payments are not made on time.
Delinquent: An account where payments are past due.
Down Payment: Cash payment for a portion of an asset's purchase price.
Equity: The difference in the value of an asset and the amount owed on that asset.
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.
FHA Loan: Loans insured by the Federal Housing Administration.
Foreclosure: The forced sale of a property when the borrower has failed to meet repayment terms.
Fraudulent Transaction: Transaction made with a credit card without the authorization of the card owner.
Garnishment: Legal process where debt is repaid by withholding a portion of the borrower's income.
Installment loan: A loan where equal, consistent payments are made on a regular, pre-specified basis.
Interest Rate: The rate a lender charges to lend money.
Introductory Rate: Low interest rate offered by lenders to new account holders for a specific period of time. After the introductory period ends the interest rate is increased to the normal rate.
Judgment: A decision based on a legal process.
Lien: A legal claim to satisfy a debt. A claim is made against property, like real estate, if a debt is not paid.
Liquid: An asset easily sold or converted to cash.
Maturity: The date when the balance of a loan is due.
Minimum Payment: The smallest payment allowed to keep an account in good standing.
Over-limit: A balance on a credit card higher than the original or allowed credit limit.
Principal: The balance of a loan not including interest and other fees.
Public Record Data: Information on a credit report regarding tax liens, judgments, lawsuits, and other legal proceedings.
Refinance: A loan acquired for the purpose of paying off another loan.
Second Mortgage: A mortgage made after an original mortgage; a home equity loan is a form of second mortgage.
Secured Credit Card: Credit card that requires collateral or funds deposited in order to receive the card.
Settlement: An agreement with a creditor to repay a portion of an original debt.
Term: The length of a loan.
Unsecured Credit: A loan that does not require collateral.
Upside Down: A condition where a borrower owes more money than the secured item is worth. For example, if a borrower owes more on a car loan than the fair market value of the car, he or she is considered to be upside down.
VA Loan: Loan granted to veterans of military service and guaranteed by the Veteran's Administration.