Financial Literacy - Score

Credit Report

An official record of a borrower's credit history, including such information as the amount and type of credit used, outstanding balances, and any delinquencies, bankruptcies, or tax liens. A report that a prospective lender or employer obtains from a consumer reporting agency that displays the manner in which a consumer has met his or her past credit obligations. It is used to help determine creditworthiness of the potential borrower.

Borrower

The person who signs and agrees to the terms of a promissory note and is responsible for repaying the loan.

Credit Risk

The risk that money loaned to another will not be repaid. Obligations of the U.S. Government are considered to have no credit risk.

Credit Card Debt

The total unpaid balances on all your credit cards.

Credit Management

The way you handle the money you borrow from banks or credit issuers.

Installment Loan

A loan that you promise to pay back by paying the same amount of money on a regular basis, usually monthly, for a specific amount of time. Student loans, home equity loans and auto loans are usually installment loans.

Creditworthiness

A measure of one's ability and willingness to repay a loan; qualified to have credit.

National Foundation for Credit Counseling (NFCC)

A non-profit organization dedicated to educating consumers in the wise use of credit. The NFCC is the umbrella group for Consumer Credit Counseling Service offices throughout the nation.

Credit History

A record of how a consumer has paid credit accounts in the past. It is used as a guide to determine whether or not the consumer is likely to pay future accounts on time.

Charged Off

A term on your credit report that means that the creditor attempting to collect a particular debt gave up and is no longer trying to get payment from you.

Credit Bureau

A credit bureau keeps a record of your credit history for any card or loan issuer to review when considering your application for credit. The three major credit reporting agencies in the United States are Equifax, Experian (formerly TRW) and Trans Union.

Fair Debt Collection Practices Act

A federal law that ensures you are protected from harassment and unfair treatment by debt collectors.

Fair Credit Billing Act

A federal law that ensures you can find and fix billing mistakes.

Late Payment Fee

A fee charged for failing to submit the minimum payment by its due date.

Debt

A liability or obligation in the form of bonds, loan notes, or mortgages, owed to another person or persons and required to be paid by a specific date.

Credit Criteria

Factors used by lenders to rate the credit worthiness or ability to repay debt. This includes income, the amount of personal debt, the number of accounts from other credit sources, and credit history. A lender can use any credit-related information in approving or denying a credit application as long as they do not violate the Equal Credit Opportunity Act that prohibits credit discrimination on the basis of race, sex and other factors.

Bankruptcy

Legal process for selling most of the debtor's property to help satisfy debts that can't be repaid, in exchange for (a) relieving debtors of the responsibility of paying their financial obligations or (b) protecting them while a plan is created and they try to repay debts. Two types of bankruptcy apply to consumers - Chapter 7 and Chapter 13. Once a bankruptcy has been filed, foreclosures, garnishments, repossessions, utility cut-offs and debt collection activities are automatically stayed.

Late Payment

Most charge and credit card bills list the date payments are due. If you miss the due date, the account is considered past due and you may be charged a late fee. Late payments are sometimes reflected on your credit report. If you have numerous late payments, it may be difficult to get additional credit.

Bad Credit

Poor credit rating. Things that damage your credit rating include late or missed payments, exceeding the credit line on cards, defaulting on loans, or declaring bankruptcy.

Fair Credit Reporting Act

The U.S. Fair Credit Reporting Act seeks to achieve fair, timely and accurate reporting of credit information by regulating the activities of credit bureaus, limiting access to credit bureau information, and requiring that creditors disclose certain information regarding their use of credit bureau or third-party information. Under the Fair Credit Reporting Act, you have the right to see the credit history maintained by a credit bureau about you (see Credit Report).

Due Date

The day a payment is due to a creditor. After that date, a late fee can be charged, the payment can be recorded as late, and the account can be considered delinquent.

Credit Limit/Credit Line

Your credit limit is the maximum amount you may charge on a credit card or you can carry on an account. Some card issuers set a separate limit for purchases and cash advances. Many banks allow you to spend more than your credit limit, but charge you a fee for doing so. It is up to you to keep track of your credit limit and how much available credit you have left.