Agent banks
Smaller banks that act as credit card agents for larger banks.
Algorithm
A complex mathematical model. In credit scoring, it is used to compare
data in millions of credit reports and predict a person's likelihood to
repay debts.
Annual membership fee
A charge paid by holders of some credit cards for the privilege of using
that card.
Annual percentage rate (APR)
The percentage of the loan that is paid to the creditor, as established
by each state.
ATM cards
Plastic cards issued by banks for use in automated teller machines.
ATM
An automated teller machine.
Bank card system
Since most banks cannot afford to support all of the functions associated
with credit cards, smaller banks .contract with larger banks for card-related
services.
Bankruptcy
The legal process under which the debtor is given a new start and relieved
from having to pay their current debts or the creditors receive a fair
distribution of the debtor's assets (depending on the type you file. Bankruptcies
usually stay on a person's credit report for 10 years.
Chain
The line of support that extends from the major bank through its agent
banks.
Charge off
An unpaid portion of a bill that a lender has accepted will never be paid
and has recorded on the books as a bad debt. It is a serious negative
item on a credit report.
Collateral
Something of value that can be sold by the lender in the event of a default
on the loan.
Collection
A creditor's attempt to recover a past-due payment by turning the account
over to a collection department or company. Having a debt in collection
is a serious negative item on a credit report.
Collection agency
A company that attempts to collect bad debts for a percentage of what
is collected.
Credit bureau
A credit-reporting agency that is a clearinghouse for information on the
credit rating of individuals or firms. Often called a "credit repository"
or a "consumer reporting agency.” The three largest credit
bureaus in the U.S. are Equifax, Experian and TransUnion.
Credit history
A record of a person's use of credit over time.
Credit limit
The most that can be charged on a credit card or to a credit line.
Credit report
A document containing financial information about a person, focusing on
his or her history of paying obligations, such as a mortgage, car payment,
utilities, and credit cards. Also includes current balances on outstanding
debts, the individual's amount of available credit, public records such
as bankruptcies, and inquiries about credit from various companies.
Credit risk
The measure of a person's creditworthiness. People who are more likely
to repay their debts on time are considered a better risk by lenders,
and will be charged lower interest rates for borrowing money.
Consumer Statement
A written statement by the consumer disputing the accuracy of certain
information in the credit report.
Co-signer
A person who has good credit and agrees to assume responsibility for your
debts in the event that you default.
Credit history
A record indicating your trustworthiness and ability to repay a loan.
Credit report
A report issued by a credit reporting agency listing five types of information:
1) identifying information 2) account information 3) public record information
4) credit report requests and 5) a consumer statement.
Credit scoring system
A system used to rate creditworthiness.
Creditor
One who extends credit: bank, store, Credit Card Company, etc.
Debit card
A card that allows money to be electronically deducted from an account
to pay a bill or make a purchase.
Debt-to-credit ratio
The amount of money a person has in outstanding debt, compared to the
amount of credit available on all of the individual's credit cards and
credit lines. The higher a person's debt to available credit, the more
risky the individual appears to potential lenders.
Default
A designation on a credit report that indicates a person has not paid
a debt that was owed. Accounts usually are listed as being in default
after several reports of delinquency. Defaults are a serious negative
item on a credit report.
Delinquent
A designation on a credit report that a person hasn't made the minimum
payment on a loan or a credit card on time. On credit reports, delinquencies
are usually shown as being 30, 60, 90 or 120 days delinquent. Delinquencies
are a serious negative item on a credit report.
Ding
A negative or neutral entry or remark on a credit report.
Finance
See annual percentage rate (APR).
Fair Credit Reporting Act
A federal law that protects against credit abuses.
Federal Trade Commission
The federal agency responsible for bringing legal action against a credit
bureau.
FICO scores
The most commonly used credit score. The name comes from the Fair Isaac
Corporation, which developed the scoring model. They are used to predict
the likelihood that a person will pay his or her debts. The scores use
only information from credit reports.
Foreclosure
Repossession and sale of property that has been used as collateral for
a debt that has not been paid.
Grace period
The period during which no interest is charged for credit card usage.
Hard inquiry
An item on a person's credit report that indicates that someone has asked
for a copy of the individual's report. Hard inquiries are requests that
result from a person applying for credit, such as a mortgage, a car loan,
a credit card or a rental application. They are included in the formula
for determining a person's credit score.
Historical status
A record of your monthly payments.
Installment credit
A type of credit in which the monthly payment is the same every month
and the loan has a set time period. The most common forms of installment
credit are mortgages and car loans.
Judgment
A decision from a judge on a civil action or lawsuit; usually an amount
of money a person is required to pay to satisfy a debt or as a penalty.
Lien
A legal claim placed on a person's property, such as a car or a house,
as security for a debt. A lien may be placed by a contractor who did work
on your house or a mechanic who repaired your car and didn't get paid.
The property cannot be sold without paying the lien.
Major bank
The largest bank in a chain, which provides credit card services to its
agent banks.
PIN
Personal identification number issued with each ATM card.
Public record
Information on your credit report that has been obtained from court records,
such as bankruptcies, judgments and liens. These are never good.
Rate shopping
Applying for credit with several lenders to find the best interest rate,
usually for a mortgage or a car loan. If done within a short period of
time, such as two weeks, it should have little impact on a person's credit
score.
Reasonable Time
Federal law requires the credit bureau to respond to a consumer dispute
within a reasonable period of time, usually no longer than eight weeks.
Repayment history
Creditors report your credit payments as either delinquent (negative),
regular (positive), or neutral (non-rated).
Revolving credit
An account that requires a minimum payment each month plus service charges
on the remaining balance. As the balance declines, so does the service
charge.
Secured credit card
A credit card backed by the holder's cash deposit in a designated savings
account.
Short-term-debt-to-income ratio
The percentage of your annual income that your short term debt represents.
Soft inquiry
An item on a person's credit report that indicates that someone has asked
for a copy of his or her report. Soft inquiries can be from current creditors
reviewing the file, prospective creditors who want to send out an offer
such as a pre-approved credit card, or a person's own review of their
file. They are not included in the formula for determining a person's
credit score.
Subscribers
Businesses that pay a credit reporting agency for access to the files
of people who bought on credit.
Trade line
An account listed on a credit report. Each separate account is a different
trade line.
Transaction fee
A fee charged by some credit cards for each use of the card.
20 percent rule
A guideline that suggests that short-term debt be no more than 20 percent
of your annual income
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