Credit Vocab

A general term used to measure of your ability and willingness to repay a loan

Creditworthiness

Property (or something of value) pledged to back a loan

Collateral

A legal process in which people who cannot pay their debts must surrender most of their property

Bankruptcy

A statement in a credit contract that requires you to repay the entire loan immediately if you miss a payment

Acceleration clause

A record of your past borrowing and payments

Credit history

One of the three C’s, this is the measure of financial ability to repay a loan (income, debt load, etc.)

Capacity

The ability to borrow money in return for a promise of future repayment

Credit

The type of loan that is backed by something of value to ensure payment

secured loan

The time between the billing date and the payment due date when no interest is charged

grace period

A charge account that allows you to carry balances over from month to month

revolving charge account

Using another person’s identity to get cash or buy products using credit

Identity theft

The type of loan that is repaid in a certain number of equal payments for a specified amount of time with a fixed interest rate

Installment loan

A  final loan payment that is much larger than the regular monthly payments

Balloon payment

A large loan used to pay off a number of smaller loans

Debt consolidation loan

A  contractual agreement to pay a debt if the borrower does not pay it

Cosign

The total amount a borrower must pay for a loan, including interest and fees

Fiance charge

One of the three C’s, this is the value of what you own, including savings, investments, and property

Capital

A company that collects information about your credit history and sells it to lenders

Credit bureau

The percentage one will pay on an amount borrowed

Annual percentage rate

A charge account that requires you to pay off your balance each month

Regular charge account

The type of loan that is not backed by collateral

Unsecured loan

The difference between what is owed on a home and the home’s value

equity

A measure of your creditworthiness, often computed as a numerical score using the FICO system to analyze your credit history

Credit score

The maximum amount that you may charge on your credit account

Credit limit

One of the three C’s, this is the measure of your sense of financial responsibility (FICO score and credit history)

Charcter