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Living With Bad Credit Glossary

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Accounts in Good Standing:: Accounts listed on a credit report that contain positive information and help increase a credit score.
Activity:: Transactions that appear on a bill or credit report. For example, a purchase is activity on a credit card and paying a bill is listed as activity on a credit report.
Affinity Card:: A credit card offered by an organization, retail store or special interest group that is issued by a traditional credit lender. For example, a Best Buy credit card is sponsored by the retail store Best Buy but issued by the credit lender HSBC Bank Nevada.
Agreement:: The document that describes the full terms and conditions when using a credit card. The credit lender should disclose the full terms of an agreement to an individual before the individual uses the credit card.
Amount Due:: The minimum payment due on a credit card.
Annual Fee:: A fee charged once a year by some credit lenders to use their credit line. The disclosure agreement will tell whether or not the lender charges this fee, which is usually between $15 and $55.
Annual Percentage Rate (APR):: The annual interest cost of carrying a balance on a credit card. The annual amount of interest is calculated by the annual percentage rate multiplied by the balance.
Available Credit:: The difference between the limit and balance, in terms of how much credit is available for use.
Authorized User (Additional Cardholder):: An additional user for a credit line that has access to all funds. The primary cardholder is responsible for all activity by the authorized user. Being added as an authorized user to accounts in good standing can boost a credit score since the account reports to the credit bureaus.

Bad Credit:: Used to define an individual's credit status based on a poor credit rating. A bad credit status indicates that the individual is a higher credit risk to lenders, meaning that the chances that they will pay back borrowed funds as agreed is more unlikely than someone with good credit.
Balance:: The total amount of money owed to a lender. This includes any fees, interest or additional transactions.
Balance Transfer:: Taking a debt from one source and moving it to another. For example, adding the balance from one credit card to another. This technique is usually used to get lower interest rates.
Balloon Payment:: A single payment, larger than any previous payments, paid at the end of a loan contract.
Bankruptcy:: A legal statement to the courts for the inability of an individual or business to pay back debts. Claiming bankruptcy absolves most debts except federal obligations (e.g., student loans, child support and taxes). Filing a bankruptcy will lower the individual's credit score.

There are two main types of bankruptcies individuals file:

Chapter 13 Bankruptcy – a legal repayment plan, where all debts are paid back over a pre-scheduled amount of time. Once this type of bankruptcy is filed, collection agencies and lenders cannot continue to pursue the filer for payment. A Chapter 13 bankruptcy remains on the individual's credit report for 7 years.

Chapter 7 Bankruptcy – absolution of all debts. Any debt that the filer had is eliminated because the court sells off any assets the filer has to repay the debts. A Chapter 7 bankruptcy remains on the filer's credit report for 10 years.
Bill:: A detailed account of all activity on an account including any previous debt, interest and fees. The bill will state what the payment amount is, along with necessary account information.
Billing Cycle:: The time between when the previous bill was sent and the next one will be sent. The time can range from 25 to 31 days depending on the agreement between the borrower and lender.

Cash Advance:: A cash loan from an existing credit card line.
Charge Card:: A line of credit that requires that you pay the balance in full each month and does not charge interest.
Charge-Off:: Debt that a lender deems uncollectible, thereby writing off the debt as a loss.
Civil Action:: In the credit world, this is any court action against a consumer to regain money for someone else. If successful, the civil action will usually result in a wage assignment, child support judgment, small claims judgment or civil judgment of money to be paid.
Claim Amount:: The sum of money awarded in a court action.
Closed Date:: The date an account was closed. This is information found on a credit report.
Closing Date:: The last day of the month that transactions are posted to an account.
Collateral:: An item of value (e.g., property) that is used to secure a line of credit, and must be given to the lender if the debt is unpaid.
Collection Agency:: A company that a lender uses to obtain payment from consumers that fail to pay the lender as agreed. A consumer has legal rights against harassment from collection agencies and bill collectors.
Convenience Check:: A blank check, given by a credit card issuer when a new credit line is opened, used to transfer debt from another credit card to the new account.
Co-sign:: Agreement to repay a debt incurred with another consumer, if the other consumer fails to pay.
Co-signer:: The individual who agrees to repay debt on an account shared with another person. The primary accountholder is responsible to pay the debt as agreed, but if that accountholder does not pay, the co-signer is responsible for the payment.
Credit:: Funds available for a consumer to borrow, creating debt that must be repaid according to an agreement between the lender and borrower.
Credit Bureau:: A company that keeps records of the credit history of consumers. Lenders refer to the credit bureaus in order to determine creditworthiness of individuals looking for credit. The three major credit bureaus are Experian, Equifax and TransUnion.
Credit Card:: A card used to purchase items on credit. The debt accrued must be repaid according to the credit card issuer's agreement.
Credit Counseling:: Organizations or professionals that give consumers advice on how to better their credit situation. Credit counseling can be very expensive and may not always be the best option since consumers can better their credit on their own.
Credit File:: A current credit record for a consumer.
Credit History:: The record for an individual on how they have borrowed and repaid all debt. This includes both positive and negative items.
Credit Items:: Individual actions that a creditor reports to the credit bureaus about a consumer's use of credit.
Credit Limit:: The maximum amount of credit an individual can borrow. Each credit card will have a different credit limit. Exceeding a credit limit will result in large fines and will hurt the individual's credit score.
Credit Report:: A report used by lenders to judge a person's creditworthiness. This report is compiled individually by the three main credit bureaus (Experian, Equifax and TransUnion). The report contains some personal information such as: name, social security number, current and previous addresses and employer. The report will also contain the person's credit history, list all open and closed credit lines and accounts, payment history, any negative activity, bankruptcies and all public records. All inquires and credit applications are also listed. Every U.S. citizen is entitled to a free copy of their credit report, from each of the credit bureaus, once every 12 months. The credit score is calculated using the information found in a credit report.
Credit Scoring:: A mathematical calculation based on the information found in an individual's credit report compared with national statistics, to get a number that lenders use to determine creditworthiness.
Credit Union:: A non-profit financial institution that is owned and operated by its members. Credit unions provide financial services for their members, including savings and lending.
Creditworthy:: A person deemed to be less of a risk, therefore qualifying for credit.
Creditworthiness:: A judgment made on a person by a lender, determining their ability to repay debts or risk.

Daily Periodic Rate:: The interest rate charged on an account daily. The rate is calculated by taking the annual rate and dividing it by 365.
Default:: Not paying a debt as outlined in the agreement or contract. Not paying a debt as required will significantly impact a credit score.
Deferred Payment:: Payments that are made at a later date or extended over time. In some cases, putting off payments will increase the amount of interest paid.
Dispute:: Challenging an item on a credit report. Disputes can be filed online, by phone or mail through each of the credit bureaus. Credit bureaus have 30 days to investigate the dispute and verify the information or remove it from the credit report.
Date of Status:: The last date a lender reported activity on an account to the credit bureau.
Delinquent:: A term used to describe an account that is past due. There are stages of delinquency: 30, 60, 90 and 120 days past due.
Discharge:: Relief of a debt through a bankruptcy proceeding.
Disclosure:: Giving a consumer information, such as payment structure and fees, for open accounts or for a credit report. A lender must give a disclosure statement to a consumer when they apply for a new account, or as the disclosure statement is updated by the lender.

Equal Credit Opportunity Act:: A federal law passed in 1974, prohibiting creditors from lending based on marital status, race, religion, national origin, sex or age. The law allows all people to be considered for credit equally.
Equifax:: Headquartered in Atlanta, GA, this is one of the three major credit bureaus.
Experian:: With headquarters in Costa Mesa, CA and the UK, this is one of the three major credit bureaus.

Fair Credit Reporting Act:: A federal law passed in 1971 (revised in 1997), that governs what credit bureaus can report and for how long. It outlines procedures for correcting errors in credit reports. It requires credit bureaus to furnish copies of consumers' credit reports at their request. The law is designed to help consumers receive fair and accurate credit reporting and protect consumers' privacy by limiting access to an individual's credit report.
Finance Charge:: The amount a consumer is charged for using credit, including interest and fees. The finance charge appears on a billing statement.
Fixed Rate:: An interest rate that remains the same, regardless of economic indicators. Compare to variable rate.
Fraud Alert:: A notation placed on a consumer's credit report alerting creditors and other third parties that the consumer has reported fraudulent activity on their accounts or has been a victim of identity theft. It asks the credit issuer to take additional verification steps before granting credit, such as contacting the consumer at a specified phone number. Policies regarding fraud alerts vary by credit issuer, and can include calling the consumer, asking the applicant for additional proof of identity or simply denying the application. Any consumer may place a fraud alert on their credit report for free by contacting one of the three major credit bureaus. The credit-reporting agency contacted should forward the fraud alert to the other two. Initial fraud alerts expire after 90 days, but can be renewed.

Grace Period:: The period of time after a debt comes due, during which the debtor may be permitted to delay payment of a debt obligation without incurring a penalty. During this period of time the consumer/debtor is allowed to pay back a debt without being charged interest and/or a late fee.

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Inquiry:: A list, found on a credit report, of every time a lender looked at an individual's credit report. There are two types of inquiries: hard and soft. When applying for a line of credit, a hard inquiry made by a lender will lower your credit score. A hard inquiry is viewed by anyone looking at the credit report. Any unsolicited inquiry from a lender, called a soft inquiry, will not affect a person's credit score and is only viewable by the individual, not lenders.
Installment Credit:: A line of credit allowing the consumer to make payments on the balance of the loan, without having open access to the credit line. A mortgage or loan is an installment line of credit.
Investigation:: The term used to describe what the credit bureau does after a consumer disputes an item on their credit report. The investigation includes the credit bureau verifying the disputed information with the lender. If the information can be confirmed as accurate, it will remain on the consumer's credit report. If the information cannot be verified, it will be removed. The investigation usually lasts 30 days.

Joint Account:: Any account where there are two applicants. Each party can use the credit line and is responsible for the debt incurred. Usually with a joint account, a party cannot be removed unless the credit line is closed.

Liability:: Responsibility of a consumer to pay back debts as agreed.
Lien:: A legal claim upon real or personal property as security for or payment of a debt.
Line of Credit:: The maximum amount of credit an individual can use.

Minimum Payment:: The minimum amount a consumer is required to pay on a debt. It will take significantly longer to pay off a debt if you make only the minimum payments every month.
Monthly Periodic Rate:: The interest rate charged on an account per month. The rate is calculated by taking the annual rate and dividing it by 12.

Over-the-Limit Fee:: A fee that may be charged if the credit limit is exceeded.

Points:: An upfront charge, usually paid at closing, that is added on to a mortgage loan, in addition to regular finance charges, fees and interest. Discount Points are interest charges paid up-front when a borrower closes a loan. A point is equal to 1 percent of the loan amount (e.g., 1.5 points on a $100,000 mortgage would cost the borrower $1,500). Generally, by paying more points at closing, the borrower can reduce the interest rate of his loan. Origination Points are fees imposed by a lender to cover certain processing expenses in connection with making a real estate loan.
Posting Date:: The date any particular activity is recorded on an account.
Prime Rate:: The interest rate given to individuals with excellent credit, set by the U.S. Federal Reserve.
Payment Status:: The payment history listed on an individual's credit report. The payment status includes any negative information, such as late payments, and the current account status.
Personal Statement:: A statement that a consumer can have placed on their credit report that gives them the ability to explain anything about their credit to lenders. A personal statement will remain on the credit report until the consumer asks that it be removed.
Potentially Negative Items:: Items on a credit report that are causing the individual's credit score to be low.
Public Record Data:: The section of a consumer's credit report that lists any public record, including bankruptcies, judgments, liens and lawsuits.

Recent Balance:: The most recent amount that is owed on a debt as reported to the credit bureaus by the lender.
Recent Payment:: The most recent amount paid on a debt as reported to the credit bureaus by the lender.
Repossession:: A lender taking back possession of an item when the consumer did not pay as agreed. This is usually the last resort for a lender.
Revolving Credit:: Any line of credit that allows the consumer to make payments on a balance, which still having access to the full line of credit. Credit cards are defined as revolving credit lines.
Risk Scoring Models:: A score that determines a person's creditworthiness. See “Credit Scoring.”

Score Factors:: The top items affecting an individual's credit score. There are four factors given with any credit score that explain the reasons why the score is what it is.
Secured Credit:: A line of credit given to a consumer that has put up collateral to back any debt incurred. For example, a secured credit card is given when the amount of the credit limit is paid up front or the line is backed by a savings account.
Service Charge:: Part of the finance charges on a line of credit as charged by the lender.
Settle:: An agreement between the lender and consumer to repay a specified amount that the consumer owes.
Status:: A description of an individual's accounts as listed on the credit report. The account status will note what type of account it is, whether it is open or closed, and the payment history.

Terms:: Agreement between a creditor and lender regarding repayment of a credit line.
Tradeline:: A credit account listed on a credit report containing all information about the account.
Transaction Date:: The exact date a purchase or cash withdrawal was made on a line of credit.
TransUnion:: Headquartered in Chicago, IL, this is one of the three major credit bureaus.
Truth in Lending Act:: Passed in 1968, this federal law requires credit lenders to fully disclose credit terms to the consumer, including interest rates, fees and any other terms.

Unsecured Credit:: Also known as a signature loan, this is a line of credit given to a consumer with no collateral.

Variable Rate:: An annual percentage rate that may change over time as the prime lending rate varies or according to your contract with the lender. Compare to fixed rate.

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