Stonebridge

Glossary of Credit Terms

A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z

A

Account Review

A review of a consumer's credit history by one his/her creditors.

Active Account

An account for which activity has been reported to a Credit Reporting Agency in the last 90 days.

Adjustment

The percentage of a debt that is to be repaid to the creditor in a Chapter 13 bankruptcy.

Alias

A name reported in your credit file that differs from your primary or given name. This commonly occurs if you've applied for credit or loans under different variations of your name -- "Robert P. Smith" and "Bob Smith," for example.

Amortization

The reduction of a mortgage loan by regular payments.

Amount Due

Generally, the minimum monthly payment you must make, not the total amount you owe.

Annual Fee

The yearly fee charged by a lender to maintain an account.

Annual Percentage Rate (APR)

The cost of credit at a yearly rate. Knowing the APR allows you to effectively compare loans, even when they are structured differently.

Asset

Any holding that has a monetary value or use. Houses, real estate, cars, jewelry, and stocks & bonds are considered assets.

Authorized User

A person allowed to charge goods and services on a credit card by the primary user of that card. Authorized users -- unlike users of a joint account -- are not legally responsible for payment.

Available Credit

On a credit account, the credit limit minus the current balance. To many creditors, your total available credit on all your accounts is an important factor.

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B

Balance

The outstanding amount owed to a creditor on a particular account.

Balance Transfer

The transfer of one or more credit card balances onto another card, typically to take advantage of a lower annual percentage rate.

Balloon Payment

A final payment at the end of a loan term that is considerably larger than the regular periodic payments. Often associated with a second mortgage.

Bankruptcy

Two types apply to consumers:

• Chapter 7 refers to a court proceeding where one's unprotected assets are sold and disbursed to pay creditors.
• Chapter 13 allows the debtor an extended time to repay all or part of his/her debts. The debtor is allowed to keep his assets.

Once a bankruptcy has been filed, foreclosures, garnishments, repossessions, utility cut-offs and debt collection activities are automatically stayed.

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C

Capacity

An estimate of the amount of debt you can handle, largely based on your income in relation to the amount you already owe. See debt-to-income ratio.

Capital

A measure of your current assets, including savings, investments, and property. Capital reassures a lender by providing a means of repaying your loan in case you default. It may also provide evidence that you've met financial obligations in the past -- a fully paid car, for example, shows that you've successfully paid off an auto loan.

Cash Advance

A cash loan taken out on a credit card. Interest for cash advances is usually higher than it is for purchases, a transaction fee may apply, and the grace period may be waived.

Chapter 7 Bankruptcy

The most common form of consumer bankruptcy, Chapter 7 typically releases a debtor from all liability for the accounts included in a bankruptcy. In exchange, the debtor must forfeit some personal property. A Chapter 7 bankruptcy remains on the debtor's credit report for 10 years.

Chapter 11 Bankruptcy

Normally used for corporations, Chapter 11 can be used by consumers in certain rare cases involving extremely large debt. However, Chapter 13 is simpler and provides better protection for most consumers.

Chapter 13 Bankruptcy

A type of consumer bankruptcy under which the debtor doesn't forfeit personal property but agrees to a three- to five-year wage-earner plan to repay all or part of their debt. A Discharged Chapter 13 bankruptcy remains on a credit report for seven years from the date filed. An Open or Dismissed Chapter 13 bankruptcy remains on a credit report for ten years from the date filed.

Character

In the context of a credit application, "character" is one of the three Cs, the traditional set of criteria lenders use to evaluate an application. In most cases, character is determined by your credit report and/or score.

Charge Autod

A credit card, such as an American Express or Diners Club card, that requires full payment of the balance each month. Such cards nevertheless appear on your credit report, since they do extend credit to you (if only for short periods of time).

Charge-off

An instance in which a consumer is seriously delinquent in paying a bill and the creditor elects to transfer the account to an accounting category such as "charged to loss" or "bad debt." In such cases, the creditor may also turn the account over to a collection agency.

Closed Account

An account that has been closed by you or your creditor. Such accounts remain on your credit report for seven years from the date of last activity.

Closing

The point at which the buyer signs the mortgage documents, pays closing costs, and becomes the owner of the property. Also called a settlement.

Closing Costs

Expenses that buyers incur in the transfer of ownership of a property. Closing costs may include taxes, origination fees, attorney's fees, and other costs.

Collateral

Property you pledge as a guarantee for a secured loan. If you fail to repay the loan, the creditor can take the property. Sometimes used in place of capital as one of the three Cs.

Collection Agency

A firm assigned by a creditor to collect overdue amounts. Some creditors have internal collection departments. Like creditors, collection agencies report account information to consumer reporting agencies.

Consolidation Loan

A loan obtained in order to combine multiple debts into one, typically at a lower interest rate.

Consumer

An individual who purchases products and services.

Consumer Debt

Debt incurred for items that aren't considered tangible investments such as credit card debt, car loans, and personal loans made by family members.

Consumer Credit Counseling Service (CCCS)

Organizations that help consumers find a way to repay debts through careful budgeting and fund management. CCCS's are usually non-profit organizations funded by creditors. By requesting a longer pay-off period from creditors one-by-one, a CCCS can often design a workable repayment plan on behalf of the consumer.

Consumer Reporting Agency

See credit reporting company.

Consumer Statement

Under the Fair Credit Reporting Act, you have the right to add a consumer statement to your credit file to explain disputed information about your accounts.

Co-signer

Someone who agrees to share responsibility with the primary applicant for a loan or credit card. A consumer with poor credit may need a co-signer to get a loan or to qualify for favorable terms. Because co-signers are liable for debts incurred, co-signed accounts appear on the cosigner's credit report.

Credit

A trust or promise to buy now and pay later under designated terms for goods or services.

Credit Balance

The amount owed on a credit card. Not to be confused with a minimum payment.

Credit Bureau

See credit reporting company.

Credit Autod

A card used to make purchases or take out cash loans that requires the user to pay some or all of the outstanding amount each month. Credit cards are differentiated mainly by their terms.

Credit Autod Issuer

A bank or other institution that extends consumers credit through a credit card.

Credit File

The collection of an individual's credit history, identifying information, and other records maintained by a credit reporting company. "Credit file" is sometimes used interchangeably with credit report, but technically a credit file is the source from which a credit report is generated.

Credit Fraud/Identity Theft

A crime that involves using another person's identity (e.g. name, Social Security Number or other personal information) to acquire credit or make purchases.

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.

Credit Limit/Credit Line

The amount of credit issued by a lender.

Credit Repair Agencies/Credit Clinics

Companies that claim they can "clean up" or "erase" a consumer's bad credit.

Credit Report

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.

Credit Reporting Agency

Commonly known as credit bureaus, credit reporting agencies are companies that receive, maintain, and provide information about consumers' credit history. Three national agencies -- Equifax, Experian, and TransUnion -- dominate credit reporting. There are many smaller agencies, but almost all of them get information from one or more of the three major agencies.

Credit Risk

The likelihood of a consumer to pay back an outstanding debt.

Credit Score

A numerical estimation of the likelihood that you'll meet debt obligations. A creditor gets your information from a credit reporting company and applies a credit scoring model to calculate your credit score. For more information, see FICO® Scores.

Creditor

A company that enables consumers to make purchases on credit and/or lends consumers money. Sometimes used interchangeably with lender.

Creditworthiness

An assessment of a consumer's past credit behavior that allows a potential lender to decide whether or not to extend credit.

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D

Daily Periodic Rate

A credit card's annual percentage rate divided by 365 days.

Debit Autod

A card that allows purchases to be deducted directly from a consumer's personal checking account.

Debt-to-Income Ratio

Your income compared to the debt you owe.

Debtor

One who owes a debt.

Default

Failure to fulfill an agreed-upon financial obligation, such as making a loan payment.

Delinquency (30, 60 or 90 days)

Past-due payment on a loan.

Discharge

To release a debtor from responsibility for a debt, often as a result of bankruptcy.

Discretionary Income

The money you have left over when all expenses and other financial obligations are paid.

Dismissed Bankruptcy

An instance in which a judge has ruled against a consumer's petition for bankruptcy, sometimes at the consumer's request. Such cases are recorded in the public records section of the consumer's credit report, and the debts covered in the bankruptcy remain outstanding.

Disposable Income

Money left over after taxes are deducted.

Dispute

To question the accuracy of information on a credit report. Disputes may now be effectively resolved online by notifying Equifax.

Downpayment

The initial amount paid in cash toward the total price of a home or car. A large down payment may help you get a more favorable interest rate and let you avoid having to buying mortgage insurance.

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E

Equal Credit Opportunity Act (ECOA)

A federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status, or receipt of income from public assistance programs.

Equifax Credit Report™

Equifax compiles data from many sources and creates a file that reflects your personal credit history.
Learn more.

Equifax Credit Watch™ Gold

Equifax credit monitoring service plus unlimited access to your credit report. Equifax Credit Watch™ Gold will email notifications to you within 24 hours of any key changes in your credit file, which may be warning signs of identity theft. Also includes $20,000 Identity Theft Insurance (limits apply).
Learn more

Equifax Credit Watch™ Silver

Equifax credit monitoring service plus one-time access to your credit report. Equifax Credit Watch™ Silver will email notifications to you within 7 days of any key changes in your credit file, which may be warning signs of identity theft. Also includes $2,500 Identity Theft Insurance(deductible applies).
Learn more

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F

Fair Credit Reporting Act (1971; amended in 1997 and 2003)

A federal law that among other things enables consumers to learn what information consumer reporting agencies have on file about them, and to dispute errors in the file. It also specifies certain permissible purposes for which credit reports may be furnished. It provides consumers with the right to obtain a copy of their report at no charge if their have been turned down for credit.

Fair, Isaac Company

The developer of the FICO® score, a credit scoring model used by many creditors.

FICO® Score

A credit score derived from the application of a credit scoring model created by the Fair, Isaac Company to a consumer's credit file held by a credit reporting company. FICO® scores range from the 300s to the 900s, but almost all consumers have a score between 500 and 850.

Finance Charge

The cost of a loan expressed as a dollar amount.

Finance Company

A company that mainly lends money to consumers who cannot qualify for credit at a credit union or bank. Finance companies generally charge higher rates than other creditors.

Fixed Rate

An interest rate that remains constant, regardless of economic indicators. Compare variable rate.

Foreclosure

The legal process by which a creditor may sell mortgaged property to recover a defaulted mortgage.

Fraud Alert

If you suspect that you're the victim of identity theft or credit fraud, you may contact the credit reporting agencies and place a fraud alert on your credit file. Such an alert will prevent new credit accounts from being opened without your express permission.

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G

Garnishment

A legal process whereby a creditor has obtained judgment on a debt allowing him to receive full or partial payment by seizure of a portion of the debtor's assets (wages, bank account, etc.).

Grace Period

The period allowed to avoid any finance charges by paying off the balance in full before the due date.

Gross Monthly Income

What you earn before taxes are deducted.

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H

Hard Inquiry

An indication on your credit file that a lender has obtained a copy of the report in order to evaluate your loan or credit application. An excess of hard inquiries within a six-month period may lower your credit rating. All the inquiries Equifax makes when you purchase our products and services are soft inquiries.

Home Equity

The part of your home you actually own, or the home's current market value minus the amount you still owe. See also home equity loan.

Home Equity Loan

A loan secured by a primary residence or second home to the extent of the excess of fair market value over the debt incurred in the purchase. Interest on a home equity loan may be tax deductible, but if you fail to pay your home equity loan, your home could be sold to pay off the debt.

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I

Identity Theft

A fast-growing crime that occurs when someone uses your personal information to fraudulently obtain credit. For more information, see how identity theft identity theft strikes.

Inquiry

An instance in which all or part of your credit file is accessed by a company or individual. There are different types of inquiries. Inquiries stay on your credit report for not more than two years. See also hard inquiry, promotional inquiry, and soft inquiry.

Installment Loan

A credit account in which the amount of the payment and the number of payments are predetermined or fixed.

Interest

The cost of borrowing or lending money, usually a percentage of the amount borrowed or loaned.

Interest Rate

The amount charged by a lender for borrowing money.

Investigation

The process a credit reporting company undertakes in order to verify credit report information disputed by a consumer. For more information, see correcting inaccuracies on your credit report.

Involuntary Bankruptcy

A bankruptcy instigated by creditors rather than the debtor.

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J

Joint Account

A credit or loan account held by two or more people. All account holders assume legal responsibility for the repayment of the account.

Joint Credit Report

A combined report created by merging the credit files of joint applicants and used by creditors to assess a joint application for credit, usually involving a mortgage. Note that the credit files remain separate.

Judgement

A determination by a court of law that, in the case of credit, may require a person to fulfill an obligation -- to pay a debt, for example. When a judgment has been satisfied(i.e. the debt has been paid or settled), the consumer has fulfilled its requirements and is no longer liable. Information about judgments is recorded in the public records section of a credit report.

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L

Late Fee

A fee attached to a delinquent account.

Late Payment

A payment delivered after its due date. Payments that are late by 30 days or more may be reported to credit reporting agencies and added to your credit report.

Lease

A contract that allows you the right to use or occupy property (a car or apartment, for example) over a specific length of time, during which you make regular payments and after which you do not own the property.

Lender

A company that lends money to consumers or enables them to make purchases on credit. Sometimes used interchangeably with creditor.

Liability

In the context of credit, legal responsibility for the repayment of a debt.

Lien

A legal claim upon real or personal property as security for or payment of a debt.

Line of Credit

A credit limit established by a creditor.

Loan

An extension of money that is to be repaid.

Loan-to-Value Ratio (LTV)

The ratio of the amount of a home loan to the appraised value of the home. For example, if you borrow $75,000 to buy a $100,000 house, the LTV is 75%. As a general rule, the lower the LTV, the more favorable the terms of the loan will be.

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M

Merged Credit Report

See 3-in-1 Credit Report

Minimum Payment

The smallest payment you can make on a revolving credit account to maintain your account status as being paid as agreed.

Mortgage

A loan designed to facilitate the purchase of a home, in which the home itself serves as security for the loan. If the borrower doesn't make the required payments, the lender may through a legal process known as foreclosure, sell the home in order to recover the amount owed on the mortgage. "Mortgage" can also refer to the legal document detailing the borrower's responsibilities, including the payment schedule and terms.

Mortgage Debts

Includes first mortgages, home equity loans, and any other loans secured by any real estate you own.

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N

Net Income

Your total income from employment and other sources, minus taxes.

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O

Obsolete Information

After seven years, negative information on your credit report is considered "obsolete" and should automatically fall off your credit report. The exception is a Chapter 7 bankruptcy, which remains on your report for 10 years.

Open Account

An account that is still active or still being paid.

Opting Out

Limiting the sharing of information about you to others, such as opting out of credit or insurance offers that were not initiated by you.

Origination Fee

The fee a lender charges to process a home loan. It may include the costs to check the applicant's credit report, prepare documents, inspect the property, and conduct an appraisal.

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P

Periodic Rate

An interest rate expressed in daily or monthly terms, calculated by dividing the annual percentage rate by 365 or by 12.

Permissible Purpose

A purpose for which a credit reporting company may furnish a credit report on you to a third party. Credit reports cannot be furnished unless there is a permissible purpose for the report as defined in Section 604 of the Fair Credit Reporting Act.

Personal line of credit

The maximum amount one can owe at any time, based on income, debt and credit history.

PITI

An acronym representing the main components of a monthly mortgage payment: principal, interest, taxes, and insurance.

Points

Charges levied by a mortgage lender, usually paid at closing. One point equals 1% of the value of the loan.

Prepayment Penalty

A fee assessed by a lender when you pay off your loan ahead of schedule. The penalty compensates the lender for interest payments it would have received based on the loan's payment schedule.

Primary User

The person under whose name a credit card account is listed. A primary user can authorize other people to use the account, but the primary user is ultimately responsible for repaying all charges.

Prime Rate

The interest rate charged by banks on loans to the largest and highest-rated customers. This economic indicator often serves as the basis for variable interest rates.

Principal

The outstanding balance of a loan, exclusive of interest and other charges.

Promotional Inquiry

A type of soft inquiry made to your credit report for the purpose of disclosing that a credit report was furnished in connection with a preapproved offer. If your credit history matches a creditor's criteria, that creditor gets only limited information -- not your full credit report.

Public Record

Information obtained from court records about such things as state or federal tax liens, bankruptcy filings and judgments against you in civil actions.

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Q

Qualifying Ratio

The ratio of your monthly expenses to your gross monthly income. Creditors use qualifying ratios to evaluate loan applications.

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R

Refinancing

Restructuring your home loan to get a lower interest rate or to borrow money from the amount you've already paid on a loan.

Repossession

The act of a creditor regaining possession of an item sold to you.

Revolving Balance

The total balance of all revolving credit accounts.

Revolving Charge Account

An account that requires at least a specified minimum payment each month plus a service charge on the balance. As the balance declines, the amount owed for the service charge, or interest, also declines.

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S

Satisfied

A judgment is satisfied when the debtor has fulfilled its requirements -- paid the outstanding amount, for example -- and is no longer liable.

Second Mortgage

A mortgage taken out on a home that has an existing mortgage. A home equity loan is a type of second mortgage.

Secured Credit Autod

A credit card secured by a savings account.

Secured Loan

A loan for which an item of property has been pledged in case of default. A mortgage is an example of a secured loan.

Security

See collateral.

Security Freeze

You have the right to place a security freeze on your Equifax Credit File under state law or the Equifax voluntary security freeze program. A security freeze will limit us from reporting your Equifax credit file to third parties, such as credit grantors or other companies and agencies, except those exempted by law or those for whom you contacted us and requested that we temporarily lift the security freeze. For a complete list of exceptions see  State Freeze Requirements and Fees.

Only you can request a security freeze be placed on your Equifax credit file and only you can request the security freeze be removed or temporarily lifted. A security freeze will remain on your Equifax credit file until you request the security freeze be permanently removed or you request a temporary lift of the security freeze for a specific credit grantor/credit file user or date range.

A security freeze will require you to plan ahead for all your credit applications as you will need to contact us to request that we temporarily lift your freeze to allow us to report your Equifax credit file to the credit grantor you identify. Under the laws of most states and the Equifax voluntary security freeze program, it may take up to three business days to process your request to temporarily lift the security freeze. It may take longer if you have lost the security freeze confirmation number which we provided to you when you first requested the security freeze be placed on your Equifax credit file. You may not be able to request a temporary lift of a security freeze during non-business hours or on weekends. A security freeze may hinder your ability to immediately obtain credit to make major purchases. Accordingly, if you are credit active and apply for credit on a regular basis and have a security freeze on your Equifax credit file you need to be especially mindful of the need to plan ahead and contact us in advance to request a temporary lift of the security freeze on your Equifax credit file.

An alternative to a security freeze under state law and the Equifax voluntary security freeze program is Equifax Credit Watch™ with Equifax Credit Report Control™.  This online subscription product provides you the ability to easily lock and unlock access to your Equifax credit report online and alerts you of key changes in your credit report within 24 hours so you cn take action quickly to stop any potential fraud or unauthorized activity.  You may lock and unlock your Equifax credit report for a period of time - or even for specific companies - when applying for loans, credit cards or insurance.  Together with Equifax Credit Watch, Equifax Credit Report Control is, we believe, the most effective product to prevent identity theft from ruining yur credit.

Service Charge

Additional services applied to an account.

Settlement

See closing.

Smart Autod

An electronic prepaid cash card, usually sold at banks and exchanged at face value

Social Security Number (SSN)

The unique nine-digit number assigned to every legal resident of the United States by the Social Security Administration. Because no two people are assigned the same number, the SSN is usually the main identifying factor in a person's records, including credit reports.

Soft Inquiry

An instance in which your credit report is accessed without affecting your credit rating. Soft inquiries include your own requests for your credit report, promotional inquiries by credit card companies, and "checkup" inquiries by your existing creditors. A soft inquiry that does not affect your credit rating is used when Equifax Personal Solutions provides you with our products. Compare hard inquiry.

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T

Tax Lien

A charge upon real or personal property for the satisfaction of debts related to taxes

Term

The amount of time in which a loan must be repaid in full

Three C's

Name for the traditional trio of basic criteria lenders consider when deciding whether to approve a loan: character, capacity, and capital (or collateral).

3-in-1 Credit Report

A comprehensive credit report containing credit information from all three of the major credit reporting agencies.
Learn more.

Tradeline

A credit industry term for an account listed on a credit report.

TransUnion

One of the three major national credit reporting agencies. For more information, see credit reporting agencies.

Tribureau Credit Report

See 3-in-1 Credit Report.

Truth in Lending Act

Part of the Consumer Protection Act, the Truth in Lending Act, among other things, requires lenders to disclose the annual percentage rate, the total cost of the loan, and other terms. It also regulates credit advertising.

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U

Unsecured Loan

A loan based on your promise to repay, not on pledged collateral. Compare secured loan.

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V

Vacated

A judgment that has been rendered void or set aside is said to be vacated.

Variable Interest Rate

An interest rate that changes according to a predefined formula based on an economic indicator such as the prime rate. For example, a credit card's annual percentage rate might be the prime rate plus 5%.

Voluntary Bankruptcy

A bankruptcy filed at the consumer's request.

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W

Wage-Earner Plan

The three- to five-year repayment schedule in a Chapter 13 bankruptcy. The consumer must turn over disposable income to a bankruptcy trustee, who in turn repays creditors.

Writ of Replevin

A court document authorizing repossession of a debtor's property.