Introduction to Credit
revolving credit
a line of credit extended to individuals or businesses who may use it as often as desired up to a specific dollar limit
annual percentage rate
a measure of the cost of credit; expressed as a yearly rate
FICO
acronym for Fair Isaac Credit Organization; credit score used by most lenders
spending plan
budget; plan which helps one spend money in a wise manner concerning known income, expenses and future goals
installments
buyer gains use of the commodity immediately and pays for it in periodic payments
liability
debt for which one is responsible to pay
foreclosure
event which occurs when a homeowner stops making mortgage payments and the mortgage lender takes possession of the property in order to sell it; the homeowner does not have the right to any money which comes from the sale of home
defaulting
failing to perform a task or fulfill an obligation, especially failing to meet a financial obligation
transaction fees
fees for getting cash advances, making a late payment or exceeding your credit limit
secured
guaranteed by collateral
unsecured
guaranteed only by a signature
fixed interest rate
interest rate which does not fluctuate during the fixed rate period of the loan
adjustable interest rate
interest rate which may fluctuate up or down during the term of the loan
bankruptcy
legal process available for an individual who is overextended financially and is unable to pay debts
intermediate-term loans
loans which will be in repayment for 18 month to 10 years
short-term loans
loans which will be in repayment for less than an 18 month time period
long-term loans
loans which will be in repayment for more than 10 years
means
manner by which a result is obtained or an end is achieved
application fee
money paid to the bank or mortgage company to cover the expenses of processing a loan application
credit Ratings or FICO scores
number calculated by using information on a credit report which shows lenders what risk they take by loaning money to you
credit scores
numerical expression based on a statistical analysis of one's credit files which represents one's creditworthiness; primarily based on credit report information typically sourced from credit bureaus
credit cards
one of the most common types of loans; charged with debt either by passing the numeric strip through a card reader or by manually typing in the number on the front
consumer
person who acquires goods or services for direct use or ownership, usually by purchasing with money
creditor
person who has loaned money to someone on credit through a loan
collateral
property acceptable as security for a loan or other obligation
big ticket purchases
refers to retail good with a high selling price in comparison to other items, for example, cars, homes, etc.
justification
satisfactory reason or excuse for doing something
lump sum
single sum of money which serves as a complete payment
credit
the ability to acquire money, goods or services from others without immediate payment; an agreement to repay the purchase price and whatever interest is incurred
dispute
to question the truth or validity or an entry on a statement
net worth
total assets minus liabilities or debt
interest rate
usual way of calculating interest as a percentage of sum borrowed
credit check
when a potential lender purchases a copy of one's credit report to determine whether or not the person has the ability or character to repay a debt
annual fees
yearly membership or participation fees