Credit

Credit Report

A detailed report of an individual's credit history prepared by a credit bureau and used by a lender to in determining a loan applicant's creditworthiness, including: 1. Personal data (current and previous addresses, social security number, employment history) 2. Summary of credit history (number and type of accounts that are past-due or in good standing) 3. Detailed account information 4. Inquires into applicant's credit history (number and type of inquiries into applicant's credit report) 5. Details of any accounts turned over to credit agency (such as information about liens, wages garnishments via federal, state or county records) 6. Information on how to dispute any of the above information.

Bankruptcy

A legal proceeding involving a person or business that is unable to repay outstanding debts. The bankruptcy process begins with a petition filed by the debtor (most common) or on behalf of creditors (less common). All of the debtor's assets are measured and evaluated, whereupon the assets are used to repay a portion of outstanding debt. Upon the successful completion of bankruptcy proceedings, the debtor is relieved of the debt obligations incurred prior to filing for bankruptcy.

Credit History

A record of a consumer's ability to repay debts and demonstrated responsibility in repaying debts. A consumer's credit history consists of information such as: number and types of credit accounts, how long each account has been open, amounts owed, amount of available credit used, whether bills are paid on time, and number of recent credit inquiries. It also contains information regarding whether the consumer has any bankruptcies, liens, judgments or collections. This information is all contained on a consumer's credit report.

Cash Advances

A service provided by many credit card issuers allowing cardholders to withdraw a certain amount of cash, either through an ATM or directly from a bank or other financial agency. Cash advances typically carry a high interest rate - even higher than credit card itself - and the interest begins to accrue immediately. On the plus side, cash advances are quick and easy to obtain in a pinch.

Credit Rating

An assessment of the credit worthiness of a borrower in general terms or with respect to a particular debt or financial obligation. A credit rating can be assigned to any entity that seeks to borrow money - an individual, corporation, state or provincial authority, or sovereign government. Credit assessment and evaluation for companies and governments is generally done by a credit rating agency such as Standard & Poor's or Moody's. These rating agencies are paid by the entity that is seeking a credit rating for itself or for one of its debt issues. For individuals, credit ratings are derived from the credit history maintained by credit-reporting agencies such as Equifax, Experian and TransUnion.

3 C's of Credit (capacity, character, collateral)

Your credit score is a measure of factors that may affect your ability to repay credit. It's a complex formula that takes into account how you've repaid previous loans, any outstanding debt, and your current salary. A credit score is dynamic and can change positively or negatively depending upon how much debt you accrue and how you manage your bills. The factors that determine your credit score are called The Three C's of Credit - Character, Capital and Capacity. Character: From your credit history, a lender may decide whether you possess the honesty and reliability to repay a debt. Considerations may include: Have you used credit before? Do you pay your bills on time? How long have you lived at your present address? How long have you been at your present job? Capital: A lender will want to know if you have valuable assets such as real estate, personal property, investments, or savings with which to repay debt if income is unavailable. Capacity: This refers to your ability to repay the debt. The lender will look to see if you have been working regularly in an occupation that is likely to provide enough income to support your credit use.

Credit Card

A card issued by a financial company giving the holder an option to borrow funds, usually at point of sale. Credit cards charge interest and are primarily used for short-term financing. Interest usually begins one month after a purchase is made and borrowing limits are pre-set according to the individual's credit rating

Credit Score

A statistically derived numeric expression of a person's creditworthiness that is used by lenders to access the likelihood that a person will repay his or her debts. A credit score is based on, among other things, a person's past credit history. It is a number between 300 and 850 - the higher the number, the more creditworthy the person is deemed to be.

Balance owed

(Balance owing) The amount outstanding.

Auto Finance Companies

A company that makes loans to clients.

Credit Card Companies

MasterCard, American Express, Visa, etc.

Credit Reporting Agency

This term refers to businesses that maintain historical information pertaining to credit experience on individuals or businesses. The data is collected from various sources, most commonly firms extending credit such as credit card companies, banks and credit unions. They also collect information from public records, such as bankruptcies.

Bank

a financial establishment that invests money deposited by customers, pays it out when required, makes loans at interest, and exchanges currency.

Consumer Credit Counseling Services (CCCS)

Personalized counseling services that provide guidance and support for those who have gotten in over their heads financially. The objective of most credit counseling is to help the creditor avoid bankruptcy, as well as provide basic education on financial management. Many counseling services also negotiate with creditors on behalf of the borrower to reduce interest rates and late fees.

Charge Cards

A card that charges no interest but requires the user to pay his/her balance in full upon receipt of the statement, usually on a monthly basis. While it is similar to a credit card, the major benefit offered by a charge card is that it has much higher, often unlimited, spending limits.

Consolidation loans

Debt consolidation entails taking out one loan to pay off many others. This is often done to secure a lower interest rate, secure a fixed interest rate or for the convenience of servicing only one loan.

Debtors anonymous

Debtors Anonymous (DA) is a twelve-step program for people who want to stop incurring unsecured debt. Collectively they attend more than 500 weekly meetings in nine countries. Those who compulsively unsecured debt are said to be engaged in debting and are known as compulsive debtors

Consumer Debt

Debts that are owed as a result of purchasing goods that are consumable and/or do not appreciate. Possessing high levels of consumer debt is not typically beneficial for the average individual because it increases the strain on one's sources of income to maintain regular payments. If not managed well, consumer debt can lead to bankruptcy.

Collateral

Property or other assets that a borrower offers a lender to secure a loan. If the borrower stops making the promised loan payments, the lender can seize the collateral to recoup its losses. Because collateral offers some security to the lender in case the borrower fails to pay back the loan, loans that are secured by collateral typically have lower interest rates than unsecured loans. A lender's claim to a borrower's collateral is called a lien.

Co-signed Loans

The act of signing for another person's debt which involves a legal obligation made by the cosigner to make payment on the other person's debt should that person default. Having a cosigner is way for individuals with a low income or poor/limited credit history to obtain financing. This term is also commonly spelled "co-sign"

APR (Annual Percentage Rate)

The annual rate that is charged for borrowing (or made by investing), expressed as a single percentage number that represents the actual yearly cost of funds over the term of a loan. This includes any fees or additional costs associated with the transaction.