Credit Scores

Soft Credit Inquiry

A credit inquiry that occurs when someone runs a background check on your credit, like when starting a new job. This type of inquiry does not affect your credit score.

Credit Report

A credit report is a record that details a person's credit history. It also includes identifying information, such as names and addresses, so that an individual can be matched with his or her credit history.

Hard Credit Inquiry

A type of credit inquiry that occurs when someone checks your credit history to make a lending decision. A hard inquiry affects your credit score and can remain on your credit report for up to two years.

Initial Fraud Alert

An alert put on your credit file to help prevent additional identity theft. The alert stays on your file for 90 days, at which point you can choose to renew it if necessary.

Federal Fund Interest Rate

An interest rate set by the Federal Reserve Bank in any given year that regulates interest rates on government loans.

Credit Bureaus

Credit bureaus, also called credit agencies or credit reporting agencies, are companies that collect credit information about individuals. They then calculate a credit score for each individual based on this information. Note that credit bureaus are private, for-profit businesses-they are not part of the government, though they are overseen by various government agencies. In the United States, the three major credit bureaus are Equifax, Experian, and TransUnion.

Credit History

Credit history is a record of a person's borrowing and repayment activity. Whenever you take out a loan or a line of credit, it goes on your credit history, along with all the payments you make towards the loan. This includes any detrimental information such as late payments. Consumer credit history is tracked by the credit bureaus. Your credit history is the information that goes into your credit report, though the two terms are sometimes used interchangeably. Think of it like this: Credit history is what you've done, while a credit report is where it's written down.

Default

Occurs when a borrower is unable or unwilling to repay a debt or required payment.

Fair Credit Reporting Act

The Fair Credit Reporting Act ensures that the information in your credit report is accurate, complete, and private. It requires correct use of credit reports. As a consumer, this act also gives you the right to view your credit report and dispute incorrect information.

Credit Limit

The amount of money that you are able to charge to a credit card. If you exceed this limit, your purchase may not go through and you could be penalized.

Credit Score

Your credit score is a numerical rating of your credit-worthiness (how likely you are to pay off your debts). In the United States, the most commonly used credit score is the FICO score. Credit score is based on the information in credit reports from the three main credit bureaus.