Glossery of terms related to credit

A

Annual fees
A yearly membership or membership fee charged by most credit card companies for the sake of using a credit card. Generally it ranges from $15 to $155.

Annual percentage rate (APR)
The cost of credit payable by consumers expressed as an annual interest rate.

Accounts-in-good-standing (APR)
Accounts that are reportedly in good shape and shows that you are dealing with them efficiently.

Account Condition
This is the position of an account as reported by the creditor. E.g. 'open', 'paid', 'settled', 'charge-off' etc.

B

Balance
The difference between the aggregate credit and debit sides in an account.

Balance Transfer
This is when the balance or outstanding of one credit card is switched to another.

Budget
This is the management of finance in a methodical way.

Balloon Payment
The repayment of a loan with a lump sum at the end of the month as per the conditions of repayment of the loan.

Bankruptcy
A legal declaration indicating a person's or an organization's inability to meet the debt obligations. Bankruptcy can be inducted either by the debtor (Voluntary Bankruptcy) to express his insolvency or the creditor (Involuntary Bankruptcy) to realize a part of what they owe.

C

Canceled check
A type of check already marked 'paid' on the day it is paid and is charged to the account of the person who signed the check.

Charge off
A sum of money which is written off as unrecoverable by a creditor. It imposes a negative impact on a credit report of an individual.

Collateral
One type of asset offered as a security for the sake of securing a loan.

Credit
A sum of money borrowed from a credit grantor subject to payment at a later stage usually with a periodical interest imposed on the actual borrowed amount.

Credit Bureau
An agency that maintains your credit history and provides credit report to lenders to help make decisions while extending credit. The three major credit reporting agencies (CRA) are Equifax, Experian and TransUnion.

Credit Report
A documentation of your past credit performance prepared on the basis of information provided by banks, merchants and lenders.

Credit Score
A statistical summarization of data contained in a credit report indicating an individual's creditworthiness. The most familiar type of credit score is known as the FICO score and is generally computed on the basis of the algorithm provided by Fair Isaac and Corporation. Another type of credit score named as Vantage score is expected to be launched from late 2006.

Credit Card
One type of card made out of plastic issued by a bank which permits a consumer to purchase commodities up to a certain limit subject to payment at a later stage with an additional interest levied on the outstanding amount. It is popularly known as plastic money.

Credit Limit
The maximal credit available on an individual's credit card or other types of credit account and is generally determined on the basis of past credit history.

Credit Default Swap
CDS buyer pays a fee to the CDS seller on condition, the seller would take the risk if the buyer defaults on the agreed account or debt item.

D

Debt
Amount borrowed by an individual for payment at a later stage. The person owing debt is known as the debtor while the person to whom the same is owed is known as the creditor.

Default
Failure to repay a specified amount as agreed in a credit agreement.

Delinquency
A condition that signifies a debtor's inability to make payments in time.

Dispute
Incase of an incorrect reporting on your credit file you can challenge the wrong item by mailing and notifying the CRA. This is called disputing a wrong item.

Disclosure
According to FCRA the credit bureaus have to provide the consumer with his credit history when required. This is termed as disclosure

Discharge
This is a court order to release a debtor from most of his debts after he files bankruptcy. Child support, alimony, certain student loans cannot be discharged.

E

ECOA
Stands for Equal Credit Opportunity Act and was enacted in 1974, amended in 1976 to protect consumers from credit denial by lenders simply on the basis of sex, race, religion, marital status, national origin or age.

F

FCRA
Stands for Fair Credit Reporting Act and was enacted in 1970 to provide adequate right to the consumers to have access to information stored in their credit report, avail a free copy of the report annually from all the three major credit bureaus, etc. FCRA also stands for Federal Credit Reform Act.

FICO Scores
The scores formulated by the credit bureaus based on the model of Fair Isaac Corporation is the FICO score.

Float
When credit is taken in advance or a purchase is made on a credit card the record is not updated immediately at the creditors end. This time between the expenditure incurred and the account updated is called float.

Fixed Rate
This is the APR that remains fixed and does not change.

FDCPA (Fair Debt Collection Practices Act)
This is a federal law that interdicts the unfair practices of debt collection

G

Grace period
A specific time period which allows a debtor to dispose off their credits in full without facing any legal action from a creditor.

I

Issuer
One who issues you a credit card.

Installment Credit
This is an agreement which gives you the privilege to repay your credit at steady intervals and over a specific period of time.

Interest
This is known as finance charge as well. Interest rate is what the creditor gets for lending money to you. It is calculated on the sum borrowed by you.

J

Judgment Granted
This is a decision the court takes to be implemented on the parties involved in the proceedings of the court.

Joint Account
Two people can share this account remaining individually responsible for the outstanding.

L

Late Payment
Most of your bills have a due date. Once you cross the date and make a payment it is reported as late payment.

Lien
Its a legal documentation that says that you are keeping your property as collateral while repaying your debt.

Liability
This is your responsibility to pay off the accounts that you behold.

M

Minimum Payment
The monthly minimum that you pay to your creditor.

O

Original Creditor
The creditor who has lend you the money

Obsolescence
It means how long a negative item will show on the credit report. E.g. the obsolescence period for a lien is 15 years.

Original Amount
The exact amount of money that you owe the creditor.

Over-the-limit-fee
Incase you exceed the credit limit this is charged. You might not be aware of the fact till you receive the bill for the month.

P

Past Due
Once you fail to pay on due date your account is considered past due

Principle
Subtracting the interest this is the amount of money that you actually borrowed.

Petition
When a consumer files a case (e.g. bankruptcy) wherein the judge has not yet given a date of hearing it is referred to as a petition.

Plaintiff
One who brings legal action against the opponent.

R

Released
A lien paid in full

Revolving Account
Accessible account having predetermined credit limit, and regular payments.p> <p class="glossary">S

Secured Credit
A loan taken keeping property (i.e. house or car etc.) as collateral.

Security
Your property that you pledge against a loan. Failing to pay which can incur loss of the security.

Settlement
An agreement between the creditor and you to consider payment of debt, an amount that is less than the original sum.

Status
The status of your account.

T

Tradeline
The entry made by the creditor reporting to the credit reporting agency.

Transaction
Usage of the balance in the credit card for purchase or borrowing cash

Transaction Fee
The cost of making a transaction payable to the creditor.

U

Unsecured Card
Card without a collateral given on the basis on a signed agreement and promise of payment.

Unused Credit
Unused Credit= =Credit limit - Credit Used.

V

Vacated
Judgment that was declared canceled or kept aside.

Variable Rate
This is the variation in the APR that changes you rate of interest according to the agreement.

Verification
Confirming the validity of the data on your credit report.

Voluntary Bankruptcy
Filing bankruptcy yourself.

W

Wage Assignment
Permission given to the creditor to debit your bank account in case of failure of payment from your side.

Withdrawn
Not pursuing a case after filing the documents

Writ of Replevin
Court authorized documents for repossession of security.

Z

Zero Balance
Card with no balance and activity for a month.