Credit Definitions
Relevant to Credit Cards, Mortgages, Lines of Credits, Car Loans and Other Forms of Credit
Definitions of credit and credit-related words that are relevant to credit cards, home equity lines of credit and mortgages:
- Annual Percentage Rate (APR)
- The interest rate expressed as a yearly rate. It includes the total amount financed, the finance charges, and the term of the loan and is usually different than the interest rate.
- Appraisal Fee
- The fee an appraiser charges to estimate the current market value of property offered. Especially relevant to home mortgages and home equity lines of credit.
- Asset
- Item of value that is owned and has commerical or exchange value. Assets include Assets include real property, personal property, bank accounts, stocks, mutual funds and many other things.
- Automated Teller Machines (ATMs)
- Electronic terminals that allow customers of financial institutions to make deposits, withdrawl cash, get account balances and perform other transactions just as they would through a bank teller.
- Balloon Payment
- A large final payment charged at the end of a loan or lease that usually extinguishes the debt.
- Billing Error
- Any mistake in your monthly statement as defined by the Fair Credit Billing Act.
- Business Days
- Counts the days that business is normally conducted in order to exclude weekends and holidays from a timeline. Check with your institution to find out what days it counts as business days under the Truth in Lending and Electronic Fund Transfer Acts.
- Collateral
- Assets that secure a loan and are subject to seizure if you default.
- Co-signer
- Another person who signs your loan agreement and assumes equal responsibility and liability for repaying it. If you are asked to be a co-signer, you will be equally responsible for repaying the loan or debt. (sometimes spelled “cosigner”)
- Credit
- The promise to pay for goods or services later in order to buy or borrow in the present; a sum of money due a person or business.
- Credit Bureau
- An agency that keeps credit and collection data about consumers. Their information is released to prospective lenders who are making decisions on extending credit. The three major credit bureaus in the US are Equifax, Experian and TransUnion. Also referred to as “credit reporting agencies.”
- Credit Card
- A bank-issued card that allows a consumer to purchase goods or services using a line a credit. A credit card authorizes payment for purchases and comes with a credit limit. Interest is charged on the outstanding balance. The credit limit, interest rate and possible other terms are determined by the bank issuing the card and are based on the card-holder’s income and credit history as reported by a credit report.
- Credit History
- The record of what you have borrowed and your performance in repaying debts. Remember that credit cards count as borrowing and paying debts.
- Credit Report
- A report generated by a Credit Bureau that lists your credit, repayment, residence and employment history to help determine creditworthiness (risk).
- Creditor
- A person or business you borrow from, or owe money to. A grantor of credit.
- Credit-Related Insurance
- Health, life, or accident insurance designed to pay the debt you have outstanding.
- Credit Scoring System
- A system creditors use to help determine whether to give you credit. The system evaluates your ability to repay loans. The scoring system uses various characteristics relevant to whether you would be a good risk for credit. It is used for credit card applications, auto loans, home mortgages, equity lines of credit and other credit.
- Creditworthiness
- A creditor’s measure of an individual’s or company’s ability and willingness to repay debts.
- Debit Card (EFT Card)
- A plastic card that looks similar to a credit card that consumers can use to make purchases, withdrawals, or other types of electronic fund transfers. Unlike a credit card, however, the money is deducted directly from the cardholder’s bank account when the transaction is made with the card. When a debit card is used, it does not have consumer protections guaranteed by law to credit card users.
- Default
- Failure or unwillingness to repay a loan or meet the terms of your credit agreement.
- Disclosures
- Information about the financial and other terms and conditions of a lease or credit purchase that must be given to consumers about their financial dealings according to federal and state laws.
- Elderly Applicant
- A person 62 or older, as defined by the Equal Credit Opportunity Act.
- Electronic Fund Transfer (EFT) System
- A variety of systems and technologies for transferring funds electronically rather than by check.
- Exemplary Damages
- Another term for Punitive Damages.
- Finance Charge
- The total cost of credit expressed in dollars. For example it can be interest charged on your balance outstanding, or the charge for using a credit card, made up of interest costs and other fees.
- Home Equity Line of Credit
- A form of open-ended loan that lets the borrower borrow against the equity in a property. The home serves as collateral.
- Joint Account
- A credit account held by two or more people. All persons can use the account and all are legally responsible to repay.
- Late Payment
- A payment made after the agreed upon due date in a credit contract. As a result, additional charges may be imposed.
- Lessee
- A person who signs a lease to get temporary use of property whether a home, vehicle or other property.
- Lessor
- A person or company that provides temporary use of property or equipment to another under a lease in exchange for periodic payment.
- Liability on an Account
- Legal responsibility to repay debt.
- Open-End Credit
- A line of credit that may be used over and over again up to a defined limit. Includes credit cards, overdraft credit accounts and home equity lines. of credit.
- Open-End Lease
- A lease with an extra payment after the property is returned in order to adjust for any change in the value of the property.
- Origination Fees
- Money paid to the lender for preparing your mortgage loan.
- Overdraft Checking
- A line of credit that allows you to write checks or draw money in an amount greater than your actual balance (the overdraft) with an interest charge on the overdraft.
- Point-of-Sale (POS)
- A terminal where you, the consumer, can pay for purchases including paying electronically without using a check.
- Points
- Also called Discount Points. Finance charges paid at the beginning of a mortgage in addition to monthly interest in order to maintain or lower the interest rate charged. One point equals one percent of the loan amount.
- Punitive Damages
- Money awarded by a court over and above actual damages in order to punish the wrongdoer because of reckless or malicious acts. Punitive damages can be more than two or three time greater than actual damages. Also called “exemplary damages.”
- Rescission
- The cancellation or “unwinding” of a contract by law or by mutual consent of the parties involved.
- Security
- Real or personal property pledged by a borrower to a creditor in case of a default on a loan; see also collateral.
- Security Interest
- An interest in a property or portion of a property that secures the payment of an obligation.
- Service Charge
- A type of finance charge added to a bill. Examples for credit-related issues include a fee for triggering an overdraft checking account or a percentage charge added to an overdue account or bill.
