Adjustable-rate Mortgage (ARM): A mortgage loan where the interest rate is changed according to a specific benchmark.
Alternative Mortgage: Any home loan that is not a standard fixed-rate mortgage.
Amortization: The gradual payment process of your debt over a period of time.
AnnualCreditReport.com: Official website to obtain your free credit report from the credit bureaus, Equifax, Experian, and TransUnion.
Annual Exclusion: Also known as a gift-tax exemption.
Annual Percentage Rate (APR): As a yearly rate, the interest rate being charged on your debt.
Application Scoring: Evaluates and scores applications and credit bureau data to assess future performance.
Appraised Value: Market value of how much a property is worth.
Average Daily Balance: Number used to calculate how much interest you have to pay on a credit card balance.
Bad Debt: An irrecoverable debt to the creditor.
Balance: In a credit card account or a credit line, it is the amount owed.
Back Ratio: The sum of your mortgage payment (monthly) and your other monthly debts divided by your monthly pre-tax income.
Biweekly Mortgage: A mortgage loan that requires a payment every two weeks.
Budgeting: A plan for creating cash inflow and outflow.
Capacity: Assessed by weighing a borrower’s earning ability and the possibility of continuing income against the debt the person has at the time the credit application was made.
Capitalized Cost Reduction: Term synonymous with the down payment on a new auto loan.
Cash Advance: Loan requested from a creditor, these loans have interest rates charged.
Claim Amount: The sum owed and payable by a debtor.
Collections: When a collections department or agency tries to get a past-due debt repaid.
Credit Bureau: Company that catalogs and sells information regarding the payment behavior of consumers, and issues credit reports.
Credit Score: A numerical evaluation of your credit history used by businesses to understand how you have handled debt before.
Credit Repair: Credit counseling that repairs credit scores with tried and legal methods.
Credit Report: A consumer financial record of an individual, kept by the credit bureaus for evaluation by credit granters.
CRF: Credit Research Foundation.
Debt: Amount of money owed.
Debt collection agency: A company that collects delinquent debts from borrowers on behalf of the credit grantor.
Debt Consolidation: A process of combining debts into one loan or repayment plan.
Debt Ratio: It’s the combined monthly debt payments divided by the gross monthly income.
Default: Debt that was not been paid.
Default Rate: High-interest rate charged by the credit card issuer when a borrower infringes the card’s terms and conditions.
Delinquency: Used term for late payments or no payments on a loan.
Disclosure: Providing the consumer with his or her credit history as required by the FCRA.
Equal Credit Opportunity Act (ECOA): A law that prohibits discrimination in credit, protects consumers.
Equifax: One of the three national credit reporting agencies.
Equity: Equity is build up when you pay the mortgage of your home and the value is increasing.
Experian: One of the three national credit reporting agencies.
Fair and Accurate Credit Transaction (FACT) Act: This law requires the credit bureaus to provide US residents with their free credit report copy every 12 months.
Fair Credit Billing Act: Provides a procedure to resolve errors in case credit card users make payments on incorrect billings.
Fair Credit Reporting Act: Consumers can dispute inaccurate information from credit files thanks to this act.
Fair Debt Collection Practices Act (FDCPA): Legislation forbidding unjust debt collection practices.
FICO Score: A credit score made by Fair Isaac Corporation to evaluate your credit data.
Fixed-Rate: A constant interest rate, meaning it remains the same rate, for a credit card or loan.
FSBO: Homeowner that sells a home without a real estate agent.
Grace Period: Period to pay a bill without interest charges.
Gross Income: Total income before taxes or other deductions.
Hard Inquiry: A record of a request for a business to see your credit report when an application for cred is applied.
Hard Pull: Initial step when evaluating a consumers’ loan application.
Home Equity: The current value of your home minus the mortgage debt.
Home Equity Loan: Allows homeowners to borrow against the equity in their home.
Home Ownership and Equity Protection Act: Law created to discourage predatory lending in mortgages and home equity loans.
Identity Theft: Using other peoples’ information to commit fraud.
Installment Debt: A debt you need to pay a fixed number of times on a certain period.
Insolvent: Not being able to pay one’s debts due to lack of money.
Interest Rate: Amount charged as a percentage by a lender to the borrower.
Inquiry: Credit report record when a creditor requests your credit report data.
Late Payment: A delinquent payment or failure to deliver a loan or debt payment on or before the time agreed.
Lender: Individual or financial institution that provides the loan.
Liability Amount: Amount for which you are legally obligated to a creditor.
Lien: A legal claim against a person’s property.
Lifetime Cap: Limit on how much an interest rate can increase on an adjustable-rate loan.
Loan-to-value ratio (LTV): It’s a ratio that is calculated using the appraised value of the home, not the sale price.
Long-Term Debt: Debt obligations whose maturity is longer than one year.
Margin: Fixed amount added by a lender to the base rate of an adjustable-rate mortgage to set the loan rate.
Maxed Out: Slang meaning the credit limit has been reached for a credit card.
Mortgage Identification Number (MIN): Loan registered with Mortgage Electronic Registration Systems Inc.
Mortgage Interest Tax Deduction: Deduction for taxpayers who pay interest on home mortgage loan interest.
Mortgage Refinance: Replacing your old loan with a new mortgage. You might get a lower interest rate or lower monthly payments.
Negative Amortization: When minimum payments are not enough to cover interest charges on your debt.
Net Income: Your income after taxes and other withholdings have been deducted.
Net Worth: Total assets minus total liabilities.
NSF: Non-sufficient funds.
Obsolescence: When negative information in a credit file is not relevant anymore.
Original Amount: The original amount owed to a creditor.
Original Delinquency Date: date an account first became delinquent and after which it was never again brought current.
Origination Fee: The process of finding a loan is called origination, this is an additional fee that a lender might charge.
Over-Limit Fee: A fee charged when you spend more than your credit limit on your card.
Past Due: A loan payment that has not been made as of its due date.
Payment Cap: The amount limit a monthly payment can increase.
Periodic Rate: The interest rate you are charged each billing period.
Permissible Purposes: Legally purposes for a credit report to be issued to a third party like credit transactions, employment purposes, court orders, etc.
P.I: Acronym for principal and interest that you pay on a mortgage loan.
PITI: Acronym for principal, interest, taxes, and insurance, the four elements of a mortgage payment.
Pre-Approved: An estimate on the amount a potential homebuyer can borrow based on a preliminary credit history check.
Prime Borrower: Cardholders with a good history of paying debts in a timely manner.
Refinancing: Replacing an old loan with a new one for better terms.
Released: A lien has been satisfied in full.
Repossession: When a big amount of loan is overdue, the creditor can claim the property used as collateral for the debt.
Residual Value: Fair market value of a leased vehicle at the end of the lease term.
Reverse Mortgage: A mortgage for the elderly, access their equity without having to sell their home.
Revolving Accounts: An account where your balance and monthly payments can change.
Revolving Balance: Credit card spending that goes unpaid on the billing cycle’s end.
Risk Score: Also known as credit score.
Savings Interest Rate: Yearly interest rate you earn on your savings.
Savings Plan: Plan to save money for a specific financial goal in a certain timeframe.
Schumer Box: Chart that explains rates, fees, and terms and conditions of a credit account.
Secured Credit Cards: Cards that require collateral for approval.
Secured Debt: A loan that requires property as collateral as security for the lender.
Secured Loan: A loan backed by collateral.
Soft Inquiry: This type of inquiry does not hurt your credit score. Recorded by credit bureaus but might not appear on a report.
Tax Credit: Quantity you can subtract directly from taxes owed.
Tax-Deductible: Item or expense subtracted from adjusted gross income to reduce the amount of income subject to tax.
Tax Savings: Quantity you might save from a tax deduction.
Tradelines: Account listed on a credit report.
TransUnion: One of the three national credit bureaus.
Top of Wallet: Your most used credit card.
UDAAP: Unfair, Deceptive, or Abusive Acts and Practices.
Unsecured Credit: Credit for which no collateral has been pledged.
Unsecured Debt: A loan on which there is no collateral.
Unsecured Loan: A loan that is not backed by collateral.
Utilization Ratio: How much of your available credit you generally use.
VantageScore: A credit score launched as a competitor to the FICO score by the 3 major credit bureaus.
Variable Expenses: Expenses due each month but inconsistent in the amounts (groceries, bills, etc.)
Variable Rate: An annual percentage rate that may change over time as the prime lending rate varies or according to your contract with the lender.