Fix Your Credit EZ's
Credit Dictionary N-Z

Everything From "Open 30-Day Account"
To "Variable Rate"

Open 30-Day Account

A type of credit where a consumer promises to repay the full balance owed each month. Examples include local businesses, travel and entertainment charge cards.

Past Due

When you do not make at least the minimum payment on time, your account is considered past due.

Periodic Rate

The interest rate described in relation to a specific amount of time. For example, the monthly periodic rate is the cost of credit per month; the daily periodic rate is the cost of credit per day.

Permissible Purposes

As defined in section 604 of the Fair Credit Reporting Act, only the named reasons for requesting a credit report are deemed "permissible." Requests not meeting these criteria must be denied.

Points

Finance charges paid by the borrower at the beginning of a loan in addition to monthly interest; each point equals one percent of the loan amount.

Prepayment Penalty

Charges imposed by some lenders as a penalty for paying off a loan earlier than its original payoff date. Prepayment penalties are common among some of the sub-prime and/or predatory lending loan products.

Prime Rate

The interest rate banks charge for loans to their biggest and highest-rated customers. The prime rate changes based on the demand for money and the rate the U.S. Federal Reserve Bank charges to its member banks. It is used as a major economic indicator.

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 pre-approved offer. If your credit history matches a creditor's criteria, that creditor gets only limited information not your full credit report.

Repossession

Forced, or voluntary surrender of merchandise as a result of the customer's failure to pay as promised. There are several types and descriptions of repossession actions. On a loan secured by collateral such as an automobile or other vehicle, a repossession occurs when a creditor seizes the item securing the loan. If the loan is not brought current, the creditor typically will see the item to pay off the loan or a fraction of the amount owed. If the loan is not satisfied by the sale, a creditor will usually seek a judgment for or hire a collection agency to collect the remaining balance.

Revolving Credit

A credit agreement that allows consumers to pay all or part of the outstanding balance on a loan or credit card. As credit is paid off, it becomes available again to use for another purchase or cash advance.

Secured Loan

A loan backed by collateral and secured against something tangible such as a home (real estate).

Soft Inquiries

These are inquiries usually caused by you checking your own report, or by what are considered 'non-creditor entities' such as employers, landlords, credit bureaus, credit monitoring services, etc. A soft inquiry is one that does not affect your score.

Tax Lien

A claim against assets filed by a taxing authority against property of a person who owes back taxes.

Trade Line

A term used in the credit industry for an account listed on your credit report.

Unsecured Loan

A loan based on a consumer's promise to pay, without savings or other collateral as a guarantee.

Variable Rate

A variable rate agreement, as distinguished from a fixed rate agreement, calls for an interest rate that may fluctuate over the life of the loan. The rate is often tied to an index that reflects changes in market rates of interest. A fluctuation in the rate causes changes in either the payments or the length of the loan term. Limits are often placed on the degree to which the interest rate or the payments can vary.