Fix Your Credit EZ's
Credit Dictionary A-D

Everything From "Advance-Fee Loan" To "Delinquent"

Advance-Fee Loan

A loan calculated so that all the finance charges and other creditor expenses are deducted before the consumer receives the principal.

Adverse Action Notice

A notice that you have been denied credit, employment, insurance, or other benefits based on information in a credit report. The notice should indicate which credit reporting agency was used, and how to contact them. You are intitled to a free credit report if you've been denied credit in the last 60 days.

APR (Annual Percentage Rate)

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

Authorized User

A person who is sharing a credit card and has the right to use it, but does not have responsibility for payment.

Balloon Payment

A final payment at the end of a loan term that is considerably larger than the regular periodic payments.

Bankruptcy

A Bankruptcy is an official legal declaration that one is unable to pay their debts, and under the law is seeking legal protection from creditors. There are different types of Bankruptcy protection agreements, the most common of which are called Chapter 7 and Chapter 13. Many people unnecessarily rush into Bankruptcy without having all of the facts. Congress has recently favored creditors by passing legislation making Bankruptcy protection more difficult for the average American. A Bankruptcy is the single most damaging listing a credit report can show.

Beacon Score

A credit score that is computed from an Equifax credit report, based on scoring models developed by Equifax and Fair, Isaac and Company, Inc.

Bureau

Short for Credit Bureau. See Credit Bureau listed below.

Business Credit Report

A report showing the credit worthiness of a company. In the U.S., the two main providers of business credit reports are Dunn & Bradstreet and Experian. Most business credit information is not subject to the Fair Credit Reporting Act.

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.

Charge Off

When a creditor sells a delinquent account to an independent collection agency, the account is considered 'charged-off' by the creditor. Your credit report will label the account as a 'Charge-Off'. The collection agency will then typically report a Collection Account to your credit report as well. The creditor will cease all attempts to collect on the account because they no longer own the debt. Usually a creditor then will seek to claim the remaining unpaid debt against their taxes as a business loss. Charge-offs are extremely bad for your credit score and usually occur with unsecured loans such as credit card debt.

Collection Account

Typically, an account goes into collections after it has gone unpaid for 90 days or more. Usually the creditor will enlist the help of an independent collection agency after their in-house attempts to collect on the account have failed. Sometimes a creditor may even sell the account to a collection agency for a fraction of the amount owed. The collection agency is then entitled to 100% of the money they receive and will report a separate Collection Account to your credit report to represent their effort. Note: the same account will therefore be listed twice on your report - once by the creditor, and again by the collection agency. After being sold by the creditor the same account may be sold again and again from one collection agency to another and each will usually register a new collection account on your credit report.

Co-Maker or Co-Signer

A person who has co-signed for a loan, and will be responsible for payment if the borrower should default.

Consolidation Loan

A loan usually obtained for the purpose of reducing the amount of the payments of bills owing by consolidating the bills into one loan payment. The consumer pays off several bills with the proceeds from one loan and is left with one consolidated monthly payment.

Consumer Disclosure

Your credit report is called a consumer disclosure when it is provided directly to you, because it discloses the contents of your credit file. Consumer disclosures are recorded as soft inquiries. They don't affect your credit or credit score, and the fact that you've looked at your credit is not revealed to lenders, landlords, or employers.

Consumer Reporting Agency

A company that gathers and stores personal credit histories, and provides credit reports upon request to its customers. The three main credit reporting agencies (CRAs) are Equifax, Experian, and TransUnion. CRAs are subject to the Fair Credit

Credit

The promise to pay in the future in order to buy or borrow in the present. The right to defer payment of debt.

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 TransUnion.

Credit Card

Any card, plate, or coupon book that may be used repeatedly to borrow money or buy goods and services on credit.

Credit Counseling

Advice given by professional counselors to people about how to use credit responsibly and how to get out of serious debt.

Credit History

Record of how a consumer has paid credit accounts in the past, used as a guide to determine whether the consumer is likely to pay accounts on time in the future.

Credit Limit

The maximum amount of money you can charge on a particular credit account.

Credit Report

A summary of your recent credit history plus additional facts about you, including your age, address, marital status, employment history and other details that will help creditors judge your creditworthiness.

Credit Score

A computer-generated number, based on a statistical model, that summarizes an individual's credit record and predicts the likelihood that a borrower will repay future obligations.

Daily Periodic Rate

This is your annual interest rate expressed on a daily basis. It equals 1/365th of your annual percentage rate.

Deferred Payment

Payment put off to a future date or extended over a period of time. Watch out for skip-a-month offers. Interest still accumulates when you skip a month.

Delinquent

A failure to deliver even the minimum payment on a loan or debt payment on or before the time agreed. Accounts are often referred to as 30, 60, 90 or 120 days delinquent because most lenders have monthly payment cycles.