“A” loan – The credit industry term used to describe a loan that reflects the best possible interest rate, terms and conditions. Consumers must demonstrate good credit in order to secure an “A” loan
“B” or “C” loan – The credit industry term used to describe loans that reflect less than the best possible interest rate, terms and conditions. Consumers with negative or derogatory credit may be offered “B” or “C” loans. These loans always impose a higher interest rate and fees.
2nd Mortgage or “secondary” mortgage – A loan secured by mortgage or trust deed, which lien is “junior” to another mortgage or trust.
A.S.U – Accident, sickness and unemployment insurance (sometimes referred to as A.S.R. – accident, sickness and redundancy insurance). This is an insurance policy, which is taken out by the borrower and protects against the borrower being unable to work for the stated reasons. The policy will usually pay a percentage of the normal monthly mortgage repayment (plus insurance) if the borrower is unable to work due to accident/sickness or unemployment/redundancy. These payments will normally only be made for a limited period of time – typically 6/12 months or until the borrower returns to work. The terms of these policies and the cost vary considerably from company to company.
Account number – Every card holder’s account is identified by an account number. Protect it and never give it out over the telephone unless you initiated the call.
Activate – To prevent fraud, many card issuers require you to call them when you receive your new card in the mail to verify that the correct person has received it. Until proper ownership is confirmed, the card may not be activated.
Activity – Activity is any transaction that appears on your bill, including purchases, cash advances, finance charges and fees. It also includes any payments made.
Additional card member/card holder – Most issuers allow you to sign on an additional card holder, such as a spouse, to your account. You are liable for any charges that the additional card holder incurs.
Administration Fee – This is a fee charged by some lenders, which is not refundable if the mortgage application does not proceed. The Administration fee will often form part of the valuation fee but will be retained by the lender even if the valuation has not been carried out.
Advance-fee loan – A loan calculated so that all the finance charges and other creditor expenses are deducted before the consumer receives the principal.
Affidavit – A written statement made under oath before an officer of the court or notary public
Affinity Card – A card that is offered jointly by two organizations. One is a credit card issuer and the other is a professional association, special interest group or other non-bank company.
Agreement – Your card issuer will send you a card holder agreement that describes the terms that apply to your card, including the interest rate charged, method of calculating interest and any transaction fees. If your card issuer refuses to disclose fully the terms of your card agreement before you accept the card, you might want to shop around for an issuer that will.
Amortization – The process of fully paying off indebtedness by installments of principal and earned interest over a definite time.
Amount due – Generally, the minimum monthly payment you must make, not the total amount you owe.
Annual Fee – A yearly fee charged to the card for keeping the account open. Some cards have this fee and some do not.
Annual Review – The interest you pay changes annually. The change is based on an average calculation of the previous year’s base rate.
Applicant – A person applying for credit privileges, employment or some other benefit.
Appraisal Fee – The charge for estimating the value of property offered as security
Appreciation – An increase in the market value of a home due to changing market conditions and/or home improvements.
APR (Annual Percentage Rate) – The cost of carrying a balance on a loan expressed as an annual percentage. To calculate the amount owed in interest each month divide the APR by 12. For example, if the APR is 18% the monthly rate is 1.5%
Arrangement Fee – This is a fee charged by some lenders in order to access particular mortgage deals. Arrangement fees particularly apply if you are looking for a fixed rate or discounted rate mortgage and these may either be payable up front, added to the loan on completion, or deducted from the loan on completion (check with the chosen lender which situation applies).
Arrears – Contracted mortgage payment not made by the due date. Applicants who have arrears on a current mortgage may experience problems if attempting to arrange a new mortgage through the mainstream lenders. A number of lenders do, however, specialize in this area of the market.
ATM – Automated teller machine. ATM’s offer consumers convenient access to fund withdrawals, deposits, transfers and balance inquiries. Some banks charge ATM fees, depending on where the funds are drawn. Some ATM transactions involve fees from more than one bank.
Authorization – Every shop has a different limit for the amount of money you can spend on a card in the shop without it being checked first with the issuer. When you buy things, which are more than this limit, the sale has to be authorized by the card issuer. This can either be done by telephone or electronically when the card is swiped through the till by the shop assistant. In this way, stolen cards are caught and cardholders are stopped from going over their credit limit. Sometimes to authorize the transaction, the issuer needs to check the card holder’s identity.
Authorized User – The person authorized by the contractually responsible party to use the account.
Automatic payment – If you have a savings or checking account with the same bank that issues your card, you may be able to automatically transfer money from your bank account to pay a credit card bill. Automatic payment eliminates the risk of paying a bill late and being assessed a late charge.
Available credit – The unused portion of credit that falls within the consumer’s applicable credit limit, if any.
Average Daily Balance – The average daily balance is a method used to calculate finance charges. It is calculated by adding the outstanding balance on each day in the billing period, and dividing that total by the number of days in the billing period. The calculation includes new purchases and payments.
Bad Credit – A term used to describe a poor credit rating. Common practices that can damage a credit rating include making late payments, skipping payments, exceeding card limits or declaring bankruptcy. “Bad Credit” can result in being denied credit.
Balance – The total amount of money owed. It includes any unpaid balance from the previous month, new purchases, cash advances, and any charges such as an annual fee, late fee or interest. The balance should not be confused with the monthly payment (the minimum payment allowed each month), which is generally 2% – 5% for revolving credit cards.
Balance Transfer – Moving a balance (debt) from one credit card to another. This is often done with special checks or forms, or may be offered as an option on some credit card applications. The usual reason is to shift an ongoing debt to an account with a lower interest rate.
Balloon Payment – A large extra payment that may be charged at the end of a loan or lease.
Bankruptcy – A condition in which a business cannot meet its debt obligations and petitions a federal district court for either reorganization of its debts or liquidation of its assets. In the action the property of a debtor is taken over by a receiver or trustee in bankruptcy for the benefit of the creditors. This action is conducted as prescribed by the National Bankruptcy Act, and may be voluntary or involuntary.
Bankruptcy Chapter 11 – Business reorganization under the Federal Bankruptcy Code.
Bankruptcy Chapter 12 – Reorganization for farmers under the Federal Bankruptcy Code.
Bankruptcy Chapter 13 – In simple terms, a Chapter 13 bankruptcy involves the reorganization of a debtor’s financial affairs. The goal is to create a payment plan for the benefit of the creditors, while protecting the debtor from foreclosure, garnishment, or similar consequences. In order to qualify for Chapter 13 bankruptcy, the debtor must have an income that exceeds the debtor’s reasonable living expenses, as it is necessary that the debtor have sufficient means to provide repayment to creditors of past debts. In some cases repayment may be for the full amount of the debt, while in others the debtor may pay off only a small percentage of certain debts – perhaps as little as ten percent. This form of bankruptcy is commonly referred to as a “wage earner plan.” A Chapter 13 bankruptcy can appear on your credit report for up to ten years.
Bankruptcy Chapter 7 – Chapter 7 bankruptcy lets you eliminate (discharge) most of your debts in exchange for giving up property that is not protected by “exemption” laws. In simple terms, it is a liquidation of assets. Someone called a bankruptcy trustee sells your property and distributes the money to your creditors. Any remaining unpaid debt is wiped out. If you don’t have much property, you may get to keep what little you have. A chapter 7 can appear on your credit report for up to ten years.
Bankruptcy Discharged – A court order terminating bankruptcy proceedings on old debts.
Bankruptcy Dismissed – A court order that denied one’s bankruptcy petition making the debtor still liable for all debt.
Bill – Each billing cycle (usually once per month) your card issuer will send you a bill. The bill will detail the activity on your account for that billing cycle. The reverse side of your bill usually describes some of the basic terms of your card agreement, including how the interest is calculated and where to call with questions. See your card agreement for complete information on the terms.
Billing Cycle – The number of days between statement dates. This is generally about 25 days.
Borrower – A person or entity using someone else’s money or funds to purchase something. May be used interchangeably with the term debtor.
Budget – A financial plan for saving and spending money. An itemized list of all expenses. Budgets are tools commonly used to measure or gage expenses against income.
Budget card – Budget cards work like a credit card, except for the credit limit. You agree with the issuer to pay a set amount each month by direct debit. The credit limit is a multiple of the pre-set amount you have agreed.
Building insurance – Lenders may insist that you take out this cover. It protects you and the lender in case the building falls down or is fundamentally damaged. Most lenders will offer this as part of the mortgage, but you are not required to take it from them.
Buy down – A lump sum payment made to the creditor by the borrower or by a third party to reduce the amount of some or all of the consumer’s periodic payments to repay the indebtedness.
Capacity – The ability to make mortgage payments on time, depending on income and income stability, assets, reserves and the amount of income each month that is available after paying housing costs, debts and other obligations.
Capital/cash reserves – The cash reserves (savings), investments or assets possessed by an individual.
Cash advance – You can use your card at a bank or an automatic teller machine to get a cash loan. The interest rate for a cash advance is typically higher than it is for purchases, and there is usually no grace period. There can also be a handling fee for withdrawing cash in addition to the interest charges, which can raise the cost significantly.
Cash back (on credit cards) – A cash reward paid for using the card. Issuers pay back a percentage of the amount spent on the card either at the end of the month or at the end of the year.
Cash back (on mortgages) – This is the arrangement whereby a cash sum of money is repaid to the borrower at the start of the mortgage. The amount of the cash back will vary considerably from lender to lender with the highest amounts being paid where the borrower is willing to fore go any fixed or discounted rate offers and pay the normal variable mortgage rate. Cash back deals are also available in conjunction with some fixed or discounted rates but the amount of the cash back will normally be reduced in these circumstances. If a large cash back is being considered then it could, in some circumstances, be liable to Capital Gains Tax (refer to the lender, your accountant or local tax office for clarification). The lender will normally impose early redemption penalties if the mortgage is redeemed within the first few years (see Redemption Penalties).
Charge Card – A card, which requires payment in full upon receipt of the statement.
Charge Off – Accounting term to indicate that the creditor does not expect to collect a balance owing on an account.
Closed-end Credit – Generally, any loan or credit sale agreement in which the amounts advanced, plus any finance charges, are expected to be repaid in full over a definite time. Most real estate and automobile loans are closed- end agreements.
Closing date – The closing date is the last day that transactions are posted on your account for that month.
Co-sign – To sign a credit agreement with someone and agree to share the debt with that person or assume the debt if the other person defaults, that is, doesn’t pay.
Co-signed account – A loan or credit account cosigned by an individual who pledges to pay if the primary borrower does not pay.
Co-signer – Another person who signs for a loan and assumes equal liability for it
Collateral – Property that is offered to secure a loan or other credit and that becomes subject to seizure on default.
Collateral Estoppal – Prior judgment from a lawsuit between parties on a different cause of action that bars re-litigation of those matters in a subsequent lawsuit.
Collection Account – Refers to the status of an account owed to a creditor when it has been transferred from a routine debt to a Collection Department of the creditor’s firm or to a separate professional debt-collecting firm.
Collection Agency – If you fail to pay a credit or charge card bill, the card issuer may send your overdue bill to a collection agency, a company that will attempt to obtain payment from you. If this happens, your account may be listed as a “collection account” on your credit report. If you do not pay your bill and your card issuer has to go to a collection agency to attempt to obtain payment from you, you may be liable for the cost of the collection agency’s services. Check your card holder agreement to see if your card includes this potential fee.
Common Law – As distinguished from law created by legislatures (statutory law), the common law s that law which is founded in ancient customs and practices as interpreted by the courts.
Community Reinvestment Act (CRA) – Encourages banks to help meet the credit needs of their communities for housing and other purposes, particularly in neighborhoods with low or moderate incomes, while maintaining safe and sound operations.
Compensating factors – The term used by lenders for examining a borrower’s credit strengths and weaknesses. If a borrower is exceptionally strong in one area, such as cash reserves, the borrower may be weaker in another area, such as late payments in the credit history. In this case, the cash reserves may compensate or make up for the derogatory credit.
Concord Upgrade – The regular Lexington Law Firm retainer includes unlimited disputing with the three major consumer reporting agencies. Our Concord level of service includes those same credit bureau disputing services, however several targeted legal interventions are added which may augment your results: “goodwill negotiations” for mild late-pay accounts, “escalated information requests” for more seriously late accounts, and “debt validation” in accordance with the Fair Debt Collection Practices Act for charged-off and collections accounts.
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 – Person who uses and/or buys goods and services for family or personal use.
Consumer Credit Counseling Service – Organizations, which help consumers, find a way to repay debts through careful budgeting and management of funds. These are usually nonprofit organizations, funded by creditors. By requesting that creditors accept a longer pay-off period, the counseling services can often work out a successful repayment plan.
Convenience check – When you open a new account with a credit card issuer, it may send you a blank convenience check or transfer check so you can shift the debt you have with your old card to your new card.
Copy charge – Card issuers are required to provide you with copies of documents relating to your account. They may, however, charge a fee for the copying and handling. See your card holder agreement for your issuer’s copy charges
Counterclaim – A claim presented in a pending lawsuit by a defendant against plaintiff in opposition to, or deduction from, plaintiffs claim.
Cram down – The effect of certain provisions of the Bankruptcy code which allow the debtor to avoid the unsecured portion of an under secured claim when the under secured claim is not secured solely by the debtor’s principle residence. ( Also known as LIEN STRIPING)
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 Trans Union.
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 grantor – Person or business furnishing consumer goods and/or services on credit.
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 Ratings – “R” refers to a revolving account, “I” refers to an individual account, and “M” refers to a mortgage account. This rating is supplied by the creditor. It is their rating of you as a borrower. There are only two ratings which are not negative. A rating of “1″ is good and a rating of “0″ means that they don’t have enough history with you to rate you.
Every other rating, “2″ through “9″ is negative. In our experience, creditors don’t look at these ratings when you apply for financing. The creditor usually looks at the late pays or other notations such as “charge off” or “collections.” However, any rating but a “1″ or “0″ indicates that you have problems with the account.
Credit Report – A summary of your credit history. It is maintained by an credit reporting agency and sent to potential creditors, when requested. Credit reports include information such as current and recent addresses, employer information, payment performance for seven years, type of debt you have and the lending institution for each account, available credit, and current balances.
Credit Reporting Agency – A company that gathers files and sells information to creditors and/or employers, to facilitate their decisions to extend credit or to hire.
Credit Risk – The credit industry term meaning the level of risk or likelihood of future default by an individual borrower.
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.
Credit Scoring System – A statistical system used to determine whether or not to grant credit by assigning numerical scores to various characteristics related to creditworthiness.
Credit union – A democratically owned and controlled nonprofit financial cooperative that offers a variety of savings and lending services to members.
Creditor – Person to whom money is owed by a debtor; someone to whom an obligation exists.
Creditworthiness – A creditor’s measure of a consumer’s past and future ability and willingness to repay debts.
Daily Periodic Rate – The daily periodic rate is your annual interest rate expressed on a daily basis. It equals 1/365th of your annual percentage rate
Debit Card – Purchases are deducted directly from the consumer’s personal checking account.
Debt – A sum of money owed from one person or institution to another person or institution.
Debt validation – The Fair Debt Collections Practices Act affords consumers the right to request that third-party collectors provide detailed information regarding the origin, provenance, and reassignment of alleged charged-off or collection accounts. Third-party collectors which cannot properly validate such accounts may not report information about the alleged debt to consumer reporting agencies. Formal requests for debt validation are investigative and do not contest or dispute the facts of an account. Concord Upgrade
Debtor – The person or entity that borrows money. The term debtor may be used interchangeably with the term borrower.
Deed In Lieu – The process wherein property owners give title to the lender to avoid foreclosure.
Default – Failure to meet the terms of a credit agreement.
Defendant – Any person or entity that is being sued.
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
Discount – An amount deducted from the regular price for those who purchase with cash instead of credit.
Dismissal with prejudice – n the bankruptcy court, a court order dismissing the bankruptcy case with an order prohibiting the debtor from filing another bankruptcy until the expiration of some specified time. In a non-bankruptcy matter, the dismissal of an action without the right to raise those issues again.
Dispute – The Fair Credit Billing Act governs Credit and charge card bills, in the United States, which is included in the Truth in Lending Act. If you think your bill is wrong, write to your card issuer at the address listed on your statement. You must write no later than 60 days after receiving the first statement where the error appeared. The card issuer must acknowledge your letter within 30 days, and correct the error or explain why it thinks the statement was correct, within two billing cycles (but in no event later than 90 days) after receipt of your letter. You do not have to pay the amount in question while it is being investigated, but you must pay the rest of your bill.
Docket – A list of cases and their status on a court’s calender.
Due Date – The day a payment is due to a creditor. After that date, a late fee can be charged and the payment can be recorded as late, or the account can be considered delinquent
Effective date – The first day your card is activated and ready for use or when new terms take effect.
EQ – Common Abbreviation for Equifax
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 – One of the three major credit reporting agencies, headquartered in Atlanta, Georgia.
Equitable – Just; conformable to the principals of justice and right.
Escalated information requests – The Fair Credit Billing Act and the more extensive Truth in Lending Act which incorporates it requires furnishers to provide full disclosure and detailed information regarding consumer accounts. Such investigations may engender positive outcomes for a consumer’s credit standing and are leveraged without contesting or disputing the account. Concord Upgrade
Estoppal – A party prevented by his own acts from claiming a right to the detriment of a second party, when the second party did some act in reliance on the first party’s acts. An Estoppal arises when one is forbidden by law to speak against his own act or deed.
Eviction Action – A court action to obtain possession of premises by the person entitled to actual possession (also may be known as Forcible Entry and Detainer).
EX – Common abbreviation for Experian
Experian – One of the three major credit reporting agencies, formerly known as TRW
Fair Isaac Company – Originators of the FICO score.
FCRA (Fair Credit Reporting Act) – A federal law, established in 1971, and revised in 1997, which enables consumers to learn what information Credit Reporting Agencies have on file about them, and to dispute inaccurate data in the file. It also establishes specific permissible purposes for which credit reports may be requested, and places time limits on how long adverse information may be reported.
FDCPA (Fair Debt Collection Practices Act) – Protects consumers from abusive and deceptive collection practices by collectors. You can read the Fair Debt Collections Practices Act for yourself by going to www.ftc.gov/os/statutes/fdcpajump.htm
FED – Forcible Entry and Detainer. A court action to obtain possession of premises by the person entitled to actual possession (also may be known as Eviction Action).
Federal Reserve – A central bank that monitors and influences the total supply of money and credit through its 12 regional offices. The Federal Reserve Board sets interest rates, maintains the flow of cash to local and regional banks, clears checks, provides deposit insurance, and helps guarantee the stability and security of the U.S. banking system.
FHLMC(Federal Home Loan Mortgage Corp.) – A stock-holder owned corporation ( Also call
Finance Charge – The total dollar amount paid to get credit.
Finance company – A business that makes consumer loans, often to consumers who cannot qualify for credit at a credit union or bank. Typically, the interest rates charged by a finance company are higher than those charged by other creditors.
Fixed expenses – Costs or payments that generally do not vary from month to month (for example, a mortgage payment).
Fixed Rate – A traditional approach to determining the finance charge payable on an extension of credit. A predetermined and certain rate of interest is applied to the principal.
FNMA (Federal National Mortgage Assn.) – A stock-holder owned corporation ( Also call
Foreclosure – A legal action that terminates all ownership rights in a home when the home buyer fails to make the mortgage payments or is otherwise in default under the terms of the mortgage.
Free Credit Report – A recent amendment to the Fair Credit Reporting Act ensures that each of one of the credit bureaus is required to provide consumers with a free copy of their credit report every 12 months.
Consumers in the western 13 states will be the first to access their free credit reports. These states include Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, and Wyoming.
Starting March 1, 2005 Consumers in the Midwestern states including Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, South Dakota, and Wisconsin we be able to request free copies of their credit reports.
For more information on how to order your free credit report, or to find out when your state is eligible please visit: http://www.ftc.gov/bcp/conline/pubs/credit/freereports.htm
FTC (Federal Trade Commission) – the FTC states they, “work for the consumer to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop and avoid them.” Also, the FTC is the government agency responsible for enforcing the Fair Credit Reporting Act.
Garnishment – Legal process whereas a creditor has obtained judgment on a debt may obtain full or partial payment by seizure of a portion of a debtor’s assets (wages, bank account, etc…).
GNMA ( Government National Mortgage Assn.) – A government agency ( Also called
Goods and services dispute – If you have a problem with the quality of property or services that you purchase with a charge or credit card, and you have tried in good faith to correct the problem with the merchant, you may have the right not to pay the remaining amount due on the property or services. There are two limitations on this right
Goodwill negotiations – This intervention targets accounts which are only mildly negative and attempts to enlist the furnisher to consider the isolated late payments within a larger positive historical context. In this case, the late payments are acknowledged, and the account is not contested or disputed directly with the furnisher. Concord Upgrade
Grace Period – The period allowed to avoid any finance charges by paying off the balance in full before the due date.
Graduated Payment – Repayment terms calling for gradual increases in the payments on a closed-end obligation. A graduated payment loan usually involves negative amortization.
Gross income – The income earned before taxes and other deductions. Under certain circumstances, it also may include rental income, self-employed income, income from alimony, child support, public assistance payments and retirement benefits.
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.
Holder in Due Course – A term that describes a person or other legal entity (such as a financial institution) who
Home Equity Loan – A loan based on the difference of the amount you own on your home, and the home’s current market value.
HUD (Department of Housing & Urban Development) – A government agency established to create opportunities for affordable housing for Americans. The Federal Housing Administration (FHA), which insures loans to individuals who might other wise be unable to obtain mortgage financing, is part of HUD.
Identity Theft – Identity theft occurs when an unscrupulous person gathers enough information about you to successfully impersonate you online, by mail, over the telephone, or in person. Source: Internet Safety Awareness
IN PERSONA – A term used to designate proceedings or actions against a person and/or that persons possessions.
IN REM – A term used to describe actions against one’s property only, distinguished from personal actions which are said to be
Inaccurate – Not accurate; not correct; not exact; in error.
Inquiry – A request for a copy of a credit report. An inquiry occurs every time a credit application is completed and when more credit is requested. In some cases, too many inquiries on a credit report can lower a credit score.
Installment account – A type of credit where a consumer signs a contract to repay a fixed amount in equal payments over a specific period of time. Examples include car loans, furniture loans and personal loans.
Installment Credit – A credit agreement that allows you to repay credit in regular payments over a specified time.
Interest – The cost of borrowing or lending money, usually a percentage of the amount borrowed or loaned.
Joint Account – Credit accounts held or owned by two or more persons. In the case of a joint account, all parties are held equally responsible and liable for payment under the terms and conditions of the loan contract.
Judgment – The official court decision of an action or suit. This public record may be listed on your credit report in matters of money and debts owed.
Jurisdiction – Power of a court to take action against a person or business entity. Also, power or authority of a court to adjudicate the subject matter of a case.
Late Payment – Loan or credit payments that do not reach the lender or creditor on or before the payment due date. The indication of late payments on a credit report are very damaging to an individual’s credit report.
Lease – A written document containing the conditions under which the possession and use of real and/or personal property are given by the owner to another for a stated period and for a stated consideration.
Liability – Liability refers to the responsibility for charges to an account. Generally, a card holder agrees to be liable for any charges to his or her account, including purchases, fees and finance charges. If the card holder allows someone else to make charges to his or her account (through, for example, an additional card), the card holder is still responsible for paying the bill. Two people who apply for a card together may both be responsible for the entire balance. Your liability is described in the card holder agreement you receive from the issuer. Be sure to read it carefully.
Lien – A legal hold or claim of one person on the property of another as security for a debt or charge. The right given by law to satisfy debt.
Lien waiver – A document that releases a consumer (homeowner) from any further obligation for payment of a debt once it has been paid in full. Lien waivers typically are used by homeowners who hire a contractor to provide work and materials to prevent any subcontractors or suppliers of materials from filing a lien against the homeowner for nonpayment.
Line of credit – A preauthorize d amount of credit offered to an individual, business or institution that is commonly secured against an asset such as a home (real estate).
Long Arm Statutes – Laws which permit courts to acquire personal jurisdiction over non-residents by virtue of activity within the state.
Merged Credit Report – A comprehensive credit report containing credit information from all three of the major credit reporting agencies.
Minimum payment – The minimum amount you are required to pay the credit card issuer each month. You may, however, choose to pay more. Paying the minimum monthly payment may be helpful when you can only afford to make a small payment. However, interest charges can really add up when you stretch out a loan with minimum payments.
Misleading – To lead into error; deceive or delude.
Monthly periodic rate – The rate of interest per month, calculated by dividing the annual percentage rate (APR) by 12.
Mortgage – A lien or claim against real property given by the buyer to the lender as security for money borrowed. First Mortgage-or “primary” mortgage-has priority over the claims of subsequent lenders for the same property.
Mortgage Insurance – Insurance needed for mortgages with low down payments (usually less than 20% of the price of the home).
Mortgage insurance premium(MIP) – The cost of the insurance provided to lenders by the Federal Housing Administration (FHA), which is paid by the individual home buyer. MIP is made up of two parts
Mortgage qualifying ratio – Used to calculate the maximum amount of funds that an individual traditionally may be able to afford. A typical mortgage qualifying ratio is 28
Mortgagee – The one receiving the mortgage (usually a financial institution).
Mortgagor – The one granting a mortgage on his or her property. The borrower.
Needs – The things in life that are required for basic survival, such as shelter, food and clothing.
Negative Amortization – Repayment schedule calling for periodic payments that are insufficient to fully amortize the loan. Earned but unpaid interest is added to the principal, increasing the debt. Eventually, payments must be rescheduled to fully pay off the debt.
Net income – Your take-home pay after taxes and other deductions. It is the amount of money that you actually received in your paycheck.
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.
Open-end Credit – A line of credit that may be used repeatedly up to a certain limit, also called a charge account or revolving credit.
Open-end Lease – A lease that may involve a balloon payment based on the value of the property when it is returned.
Opting Out – You have the right to say “No” to creditors and their “pre approved” offers. In fact, you can “opt out” and prevent the credit bureaus from selling your name and address in the first place. By opting out, your name will no longer appear on marketing lists purchased from the bureaus. (Although you may still receive mailings based on lists from other sources.)
Other charges – Other charges may be listed on your bill and can include the annual membership fee or late payment fees.
Over-the-limit fee – When you charge more than your credit limit allows, you may be charged an over-the-limit, or over-credit-limit, fee. Your card issuer may allow you to exceed your credit limit without telling you in advance, and you may not know you have done so until you receive your bill.
Overdraft agreement – Some issuers allow you to link your credit card to a checking or savings account that you hold with that bank. When you sign an overdraft agreement and you bounce a check, the bank can charge that amount to your credit card account and the check will clear. This way, you avoid a returned-check fee.
Overdraft Checking Account – A checking account associated with a line of credit that allows a person to write checks for more than the actual balance in the account, with a finance charge on the overdraft.
Partial payment – Paying less than the full amount due.
Past due – When you do not make at least the minimum payment on time, your account is considered past due.
Payment due date – Contract language specifying when payments are due on money borrowed. The due date is always indicated and means that the payment must be received on or before the specified date. Grace periods do not eliminate the responsibility of making sure that the lender receives payments by the due date. In most cases, lenders or creditors who receive payments past the due date will add a late charge and/or additional interest and fees.
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.
Personal Line of Credit – The maximum amount you can owe at any time, based on your income, debt and your credit history.
Personal Loan – A loan based on your income, debt and credit history.
PIN – Personal identification number used for security purposes on bank cards (also known as debit cards or check cards) and credit cards. The rightful owner is required to select and memorize a four- or five-digit numeric code, which is required to use the card at ATM’s or other points of sale.
PITI – Principal, interest, taxes and insurance combined to make up a mortgage payment.
Plaintiff – A person or entity filing a lawsuit.
Pleadings – The formal allegations by the parties of their respective claims and defenses as presented to the court for a ruling.
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.
Posting date – The date that a transaction is recorded on your account. Some companies assess interest on charges and cash advances from the transaction date, others from the posting date. It is more favorable to assess interest from the posting date, because that may be later, giving you some interest-free days.
Predatory lending – Abusive lending practices that include making a mortgage loan to an individual who does not have the income to repay it or repeatedly refinancing a loan, charging high points and fees each time and “packing” credit insurance onto a loan.
Predictive variables – The items that are part of the formula or factors comprising elements of a credit-scoring model. These variables are used to predict a borrower’s future credit performance.
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.
Prepayment penalty mortgage (PPM) – A type of mortgage that requires that the borrower pay a prepayment penalty or a fee for repaying the entire loan (or a substantial portion of it) within a certain time period. A “substantial payment” is generally defined as any amount that exceeds 20% of the original principal balance.
Previous balance – The amount you still owe after last month’s payments and charges were added to your balance.
Primary User – The person whose name is on the credit card and who is legally responsible for payment.
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.
Private mortgage insurance (PMI) – Refer to mortgage insurance.
Promotional – An interest rate that applies for a limited amount of time. After the time limit expires, the ongoing rate (which is usually higher) is applied to your outstanding balance. Check both rates when deciding which card offers the most value.
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.
Proof of Claim – An official signed document filed in bankruptcy court by a creditor which sets forth the amount the debtor owed the creditor as of the date the bankruptcy was filed.
Public Record – Information obtained by the Credit Reporting Agency from court records, such as liens, bankruptcy filings and judgments. Public records are open to any person who requests to see them.
Quit Claim Deed – A transfer of title in which the present title holder passes any interest or claim he or she has with the property but without professing that such title is valid nor containing any warranty or covenants for title.
Rebate/enhancement cards – Some cards include rebates on merchandise or cash-back offers depending on how much you charge annually. Others have enhancements that offer special benefits, such as frequent-flier miles or long-distance telephone discounts. When choosing a rebate card, be sure that the rebates the card provides add up to more than what you might save with a lower interest rate card.
Redeem – The act of paying off a mortgage debt during a foreclosure suit so as to rid the property of that encumbrance.
Renegotiable Rate – A type of variable rate involving a renewable short- term “balloon” note. The interest rate on the loan is generally fixed during the term of the note, but when the balloon comes due, the lender may refinance it at a higher rate. In order for the loan to be fully amortized, periodic refinancing may be necessary.
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.
Res Judicata – A rule which states that once a claim has been decided by the court, a person cannot bring another action based upon that same claim.
Revolving Account – An account, which requires at least a specified minimum payment, each month plus a service charge on the balance. As the balance declines, the amount of the service charge, or interest, also declines.
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
Risk-based pricing – Fee structure used by creditors based on the risks of extending credit to a borrower with a poor credit history
Secured Credit Card – A credit card secured by a savings account that has been established in advance by the borrower. The amount in the account usually determines the limit on the credit card. These accounts present no real risk factor for creditors and are therefore much easier to obtain.
Secured loan – A loan backed by collateral and secured against something tangible such as a home (real estate).
Security Interest – The creditor’s right to take property or a portion of property offered as security.
Seller’s Points – A lump sum paid by the seller to the buyer’s creditor to reduce the cost of the loan to the buyer. This payment is either required by the creditor or volunteered by the seller, usually in a loan to buy real estate. Generally, one point equals one percent of the loan amount.
Service Charge – A component of some finance charges, such as the fee for triggering an overdraft checking account into use.
Service of Process – The delivery of writs, summonses, etc. to the party to whom or with whom they ought to be delivered or left.
SET protocol – Secure electronic transaction protocol, an encryption technology designed to allow secure electronic transactions between card issuers, merchants and consumers. Unsecured information sent over the Internet can be intercepted. When making purchases on line, you should consider a secure browser that complies with industry standards, such as secure sockets layer (SSL) or secure hypertext transfer protocol (S-HTTP). These often are included with Internet connection services
Sheriffs Sale – The public auction at which the property being foreclosed is offered for sale.
Smart Card – An electronic prepaid cash card, usually sold at banks and are exchanged at face value.
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.
Statement – The monthly bill from a credit card issuer that describes and summarizes the activity on an account. A statement includes the outstanding balance, purchases, payments, credits, finance charges and other transactions for the month.
Statement Date – The date on which a statement is generated, and the month’s finance charges (interest) are added to the balance.
Status – A credit report will describe the status of your accounts — the type of account (charge, credit or installment loan) and whether your account has been paid on time, is past due or canceled.
Stay – A order of the court whereby some action is forbidden until some event occurs or until the court lifts its order.
Stored value card – An information storage card that contains stored value, which the user can “spend” in a pay phone, retail, vending or related transaction.
Sub-prime – Industry term used to describe credit and loan products that have less stringent lending and underwriting (loan approval) terms and conditions. As a compensating factor for the higher risk, however, sub-prime products charge consumers higher interest rates and fees.
Summary Judgment – A judgment obtained upon motion by any party on a claim, counterclaim or cross claim when there is no genuine issue of material fact that would prevail as a matter of law.
Summons – A notice to a party in a law suit requiring said party to appear in court or have a judgment rendered against him for failing to do so.
Surcharge – An extra charge imposed on those who purchase with a credit card instead of cash. (Currently, surcharges for credit card purchases are prohibited.)
Tax Lien – A claim against assets filed by a taxing authority against property of a person who owes back taxes.
Terms – The period of time and the interest rate agreed between the creditor and the debtor to repay a loan.
Three C’s – Capacity, collateral and credit. The term for the three primary areas used by lenders to measure creditworthiness.
Trade line – A term used in the credit industry for an account listed on your credit report.
Trans Union – One of the three major Credit Reporting Agencies.
Transaction date – The date a purchase is made or cash is withdrawn. Some companies assess interest on charges and cash advances from the transaction date, others from the posting date.
Transaction fee – A fee that is charged each time certain transactions take place, for example, cash advances.
Truth in Lending Act(TIL) – The Truth in Lending Act seeks to tell U.S. consumers important information about credit terms that can help them make informed credit choices and should protect them against inaccurate and unfair billing practices. The Truth in Lending Act was amended by, and includes, the Fair Credit Billing Act
TU – Common Abbreviation for Trans Union.
U-CCC (Uniform Consumer Credit) – A guide that states may or may not use to further simplify the understanding of all aspects of credit and credit transactions.
UCC (Uniform Commercial Code) – The laws that govern various commercial transactions.
Unsecured loan – A loan based on a consumer’s promise to pay, without savings or other collateral as a guarantee. Sometimes called a signature loan.
Unused credit – The amount of credit you have available before you reach your credit limit.
Unverifiable – Not capable of verification; that cannot be proved to be true or accurate.
VA (Department of Veterans Affairs) – A government agency established to guarantee loans to finance real estate.
Variable expenses – Costs or payments that may vary from month to month (for example, grocery bills).
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.
Wants – The things in life that are not essential for survival but are desired for comfort, convenience or status.
Warranty Deed – Deed in which a grantor warrants the status of the title.
Wraparound – A financing device that permits an existing loan to be refinanced and new money to be advanced at an interest rate between the rate charged on the old loan and the current market interest rate. The creditor combines or “wraps” the remainder of the old loan with the new loan at the intermediate rate.
Writ of Assistance – A court order directed to the sheriff ( or other local official) ordering him to
Writ of Execution – An order of the court in which a party is granted authority to seize assets of the defendant to satisfy its judgment.