Credit Building Glossary
A comprehensive guide to credit terms, definitions, and concepts to help you navigate the world of credit building and financial management.
A
Account History - The record of all activity on a credit account, including payments, balances, and status changes.
Adverse Action - A denial of credit, insurance, or employment, or a change in terms of an existing credit arrangement based on information in a credit report.
Age of Credit History - The length of time since your oldest account was opened, which affects your credit score.
Annual Fee - A yearly charge imposed by credit card companies for the privilege of using their card.
Annual Percentage Rate (APR) - The yearly cost of borrowing money, including interest and fees, expressed as a percentage.
Authorized User - Someone who is given permission to use another person's credit card account but is not legally responsible for the debt.
Available Credit - The amount of credit you can still use on a credit card or line of credit.
B
Balance - The amount of money owed on a credit account at any given time.
Balance Transfer - Moving debt from one credit card to another, often to take advantage of lower interest rates.
Bankruptcy - A legal proceeding that helps consumers eliminate or repay debts under court protection.
Bureau - Short for credit bureau; agencies that collect and maintain credit information about consumers.
C
Charge-off - A debt that a creditor has given up trying to collect and has written off as a loss.
Closed Account - A credit account that has been terminated by either the creditor or the consumer.
Collateral - Property or assets that a borrower offers to a lender to secure a loan.
Collection Account - An account that has been turned over to a collection agency for payment.
Credit - The ability to borrow money or access goods or services with the understanding that payment will be made later.
Credit Builder Loan - A type of loan designed to help people establish or improve their credit history.
Credit Bureau - Companies that collect and maintain consumer credit information (Experian, Equifax, TransUnion).
Credit Card - A payment card that allows the holder to borrow funds to pay for goods and services.
Credit Counseling - Professional guidance to help consumers manage debt and improve their financial situation.
Credit File - The complete record of a consumer's credit history maintained by credit bureaus.
Credit Freeze - A security measure that restricts access to your credit report to prevent unauthorized accounts.
Credit History - A record of how you've managed credit accounts over time.
Credit Inquiry - A request to view your credit report, either by you or a potential lender.
Credit Limit - The maximum amount you can borrow on a credit card or line of credit.
Credit Mix - The variety of credit accounts you have, such as credit cards, mortgages, and auto loans.
Credit Monitoring - A service that tracks changes to your credit report and alerts you to potential issues.
Credit Report - A detailed record of your credit history compiled by credit bureaus.
Credit Score - A numerical representation of your creditworthiness based on your credit history.
Credit Utilization - The percentage of available credit you're currently using.
Creditworthiness - A lender's assessment of how likely you are to repay borrowed money.
D
Debt Consolidation - Combining multiple debts into a single loan or payment.
Debt-to-Income Ratio - The percentage of your monthly income that goes toward paying debts.
Default - Failure to make required payments on a debt as agreed.
Delinquency - Being late on a payment; typically reported to credit bureaus after 30 days.
Dispute - The process of challenging incorrect information on your credit report.
E
Equifax - One of the three major credit bureaus in the United States.
Experian - One of the three major credit bureaus in the United States.
F
Fair Credit Reporting Act (FCRA) - Federal law that regulates how credit information is collected, shared, and used.
Fair Debt Collection Practices Act (FDCPA) - Federal law that limits what debt collectors can do when collecting debts.
FICO Score - The most widely used credit scoring model, ranging from 300 to 850.
Finance Charge - The cost of borrowing money, including interest and fees.
Fixed Rate - An interest rate that remains the same throughout the life of a loan or credit agreement.
Fraud Alert - A notice placed on your credit report to warn lenders to verify your identity before extending credit.
G
Grace Period - The time between the end of a billing cycle and the payment due date when no interest is charged.
Guarantor - Someone who agrees to be responsible for another person's debt if they default.
H
Hard Inquiry - A credit check that occurs when you apply for credit and can temporarily lower your credit score.
Home Equity Line of Credit (HELOC) - A line of credit secured by the equity in your home.
I
Identity Theft - The unauthorized use of someone's personal information to commit fraud or other crimes.
Installment Loan - A loan that is repaid in fixed monthly payments over a set period.
Interest - The cost of borrowing money, typically expressed as an annual percentage rate.
Interest Rate - The percentage charged on borrowed money or earned on invested money.
J
Joint Account - A credit account shared by two or more people who are equally responsible for the debt.
Judgment - A court decision that typically requires you to pay a debt.
L
Late Fee - A charge imposed when a payment is made after the due date.
Lender - An individual or institution that loans money.
Line of Credit - A flexible loan that allows you to borrow up to a certain limit as needed.
Loan - Money borrowed that must be repaid with interest.
Loan-to-Value Ratio - The ratio of a loan amount to the value of the asset being purchased.
M
Minimum Payment - The smallest amount you must pay on a credit account to avoid late fees.
Mixed File - When information from different consumers gets combined in one credit report.
Mortgage - A loan used to purchase real estate, secured by the property itself.
N
Negative Information - Unfavorable data on your credit report, such as late payments or defaults.
Net Worth - The difference between what you own (assets) and what you owe (liabilities).
O
Open Account - A credit account that is currently active and available for use.
Overlimit Fee - A charge imposed when you exceed your credit limit.
P
Payment History - A record of whether you've made payments on time, which is the most important factor in credit scoring.
Personal Loan - An unsecured loan that can be used for various purposes.
Pre-approval - A preliminary assessment of your creditworthiness for a specific loan amount.
Prime Rate - The interest rate that banks charge their most creditworthy customers.
Principal - The original amount of money borrowed, not including interest.
R
Refinancing - Replacing an existing loan with a new loan, typically with better terms.
Revolving Credit - A type of credit that allows you to borrow, repay, and borrow again up to a credit limit.
S
Secured Credit Card - A credit card that requires a cash deposit as collateral.
Secured Loan - A loan backed by collateral that the lender can seize if you default.
Settlement - An agreement to pay less than the full amount owed on a debt.
Soft Inquiry - A credit check that doesn't affect your credit score, often used for pre-qualification.
Statement Balance - The total amount owed on your account at the end of a billing cycle.
T
Term - The length of time you have to repay a loan.
TransUnion - One of the three major credit bureaus in the United States.
Tradeline - An industry term for any account on your credit report.
U
Underwriting - The process lenders use to evaluate the risk of lending money to a borrower.
Unsecured Debt - Debt that is not backed by collateral, such as credit cards and personal loans.
Utilization Rate - The percentage of available credit you're using across all accounts.
V
VantageScore - A credit scoring model developed by the three major credit bureaus as an alternative to FICO.
Variable Rate - An interest rate that can change over time based on market conditions.
W
Write-off - When a creditor removes a debt from their books as uncollectible, often resulting in a charge-off on your credit report.
This glossary is designed to help you understand credit terminology and make informed financial decisions. For personalized credit building strategies, explore our comprehensive guides and tools.