Credit Glossary

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annual percentage rate (APR): The percentage rate, reported as a yearly rate.

applicant: Any person who requests credit from a creditor.

asset: Property that can be used to repay a debt such as cash, real estate, or personal property.

balance: The amount owed on an account.

bankruptcy: The act of having your estate administered under the bankruptcy laws for the benefit of the creditors.

better business bureau: A company that tracks the activity of businesses and reports to the public on request if there have been any complaints.

charge card: An instrument used to buy goods and services from the issuing merchant on credit; payment usually is due in 30 days.

collateral: Property that is offered to secure a loan or credit; it becomes subject to seizure in the case of default.

cosigner: Another individual who signs for a loan and assumes equal liability for the debt.

credit: The promise to pay in the future in order to buy or borrow in the present; a sum of money due a person or business.

credit card: An instrument that may be used repeatedly to borrow money or purchase goods and services on credit.

credit contract: A written agreement between the creditor and debtor that enforces the terms of the contract.

credit history: A record of how a person has repaid debts.

credit rating: An evaluation by a creditor or credit reporting agency to reflect a debtor’s credit history based on payment pattern.

credit reporting agency: A company that keeps credit records on individuals.

creditor: An individual or business who makes credit available by lending money or selling goods and services for credit.

default: The failure to meet a financial obligation.

deferred payment: A debt that can be paid at a later time.

deficiency: The difference between the amount you owe a creditor who has foreclosed on your house or repossessed an item of personal property—such as a car, and the amount of money the sale of the property brings in. This deficiency amount is owed to the creditor by the original debtor.

exempt: An account that can be released from obligation to pay in a bankruptcy.

finance charge: The dollar amount paid to get credit.

foreclosure: The right of a creditor, such as a mortgage lender that has a lien on your property, to force a sale of your property if you have stopped making payments to recover what is owed.

gross income: Your wages before taxes and expenses are taken out.

installment contract: A written agreement to pay for goods or service purchases. It sets forth the terms, such as the payments of principal and interest, and dates of payments.

joint account: An account that two or more people can use with all assuming the liability to repay the debt.

judgment: A judgment is the decision issued by a court at the end of a lawsuit. When there is a judgment against you, the court will indicate the total amount due the plaintiff (the one who sued you).

late payment: A payment made after the due date.

lien: The legal right to hold property or to have it sold or applied for the payment of a claim owed to a creditor. A lien is usually placed on real estate.

liquidate: To convert an asset to cash.

net income: The amount of money left from your paycheck after taxes and expenses are paid.

refinance: To pay old debts with a new loan.

reinstate a contract: If you fall behind in making your payments, and the property or item is foreclosed or repossessed, you have a period of time to get the property or item back. The property or item would then be restored to you after all the back payments and fees were brought current.

repossession: When a creditor reclaims or takes back property from a debtor who does not fulfill the terms of his/her contract.

retail credit: Credit offered to customers by merchants for the purpose of allowing them to buy now and pay later.

secured credit card: A credit card you can obtain by opening up a savings account with a bank offering this program. The bank will issue a major credit card and secure it with your deposit.

secured debt: A secured debt is a specific item used as collateral to guarantee payment. If the payments cease, the creditor is entitled to the item designated as collateral.

security agreement: A security agreement is the contract you sign when you get a secured loan. The agreement indicates what property or collateral can be seized should you default.

service charge: A fee charged for a particular service, often in addition to the interest charge.

unsecured debt: A debt which has no collateral linked to the debt; i.e., there is no specific item which is guaranteed. If the debt is not paid, the creditor must sue you to try and collect.

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