Credit - Personal Finance

Credit

Any arrangement where you get "stuff" (money, goods, services), and agree to pay for it in the future

Loan

An agreement where you are credited with a fixed amount (usually of money) for a fixed period of time, usually with interest

Interest Rate

The percentage charged for the privilege of borrowing money

Principal

The amount you borrow

Term

The amount of time you have to repay your principal

Collateral

Something valuable that the lender can take as payment if you can't pay back your loan (like a house or car)

Co-signer

Someone who legally agrees to take responsibility for a person's debt if they cannot repay it

Secured debt

Debt tied to a specific tangible asset that can be used as collateral and reposed if payments are no tmade

Unsecured debt

Debt NOT tied to a specific asset or that cannot be repossessed if payments are not made

Variable-rate loan

Interest rate can change, based on prime rate or index rate, over the course of the loan

Fixed-rate loan

Interest rate is determined before loan is granted and remains constant as long as ontime payments are being made

Credit Card

A card issued by a financial company giving the holder an option to borrow funds. They charge interest and are primarily used for short-term financing. Interest usually begins one month after a purchase is made and borrowing limits are pre-set according to the individual's credit rating.

Schumer Box

A table that appears in credit card agreements showing basic information about the card's rates and fees.

Annual Percentage Rate (APR)

The rate that is charged for borrowing (or made by investing), expressed as a single percentage number that represents the actual yearly cost of funds over the term of a loan.

Grace Period

The number of days between a consumer's credit card statement date and payment due date when interest does not accrue. It is a window of time during which a consumer owes money to a credit card company for new purchases made during the last billing cycle but isn't being charged interest.

Minimum Payment

The smallest amount of a credit card bill that a credit card holder must pay each billing cycle.

Down Payment

A type of payment made in cash during the onset of the purchase of an expensive good/service. The payment typically represents only a percentage of the full purchase price

Annual Fee

A yearly fee that may be charged for having a credit card

Credit Limit

the maximum amount that you may charge on your credit account

credit card agreement

A contract that outlines the terms and conditions for using your credit card

Late payment fee

fee charged when a cardholder does not make the minimum monthly payment by the due date

interest

the price paid for the use of borrowed money

credit card statement

A detailed list of transactions, fees, payments, and balance figures for a credit card

introductory APR

The typically low rate charged during the beginning period after a credit account is opened, after which the regular, typically higher, APR will apply

Credit Bureau

A company that collects and sells information about how people handle credit. The three major national credit bureaus are Equifax, Experian and TransUnion.

Credit History

A record of a person's use of credit over time.

Credit Report

A document containing financial information about a person, focusing on his or her history of paying obligations, such as mortgages, car payments, utility bills and credit cards.

Credit Score

A three-digit number (from 300-850) that reflects the credit history detailed by a person's credit report.

Fair Credit Reporting Act

Law that grants consumers to the right to know who requests to view their credit report over the past year and to fix errors on their credit report in a timely fashion

Credit Utilization Ratio

used in the calculation of credit scores. It compares the amount of credit being used to the total credit available to the borrower

Three Credit Bureaus

Equifax, Experian, TransUnion