Credit & Credit Cards

Credit

Buying of goods and services with a promise to repay later

Principal

the amount originally borrowed

Interest

the amount the borrower must pay for the use of someone else's money

Grace Period

The time between the last day of a billing cycle and the payment due.

Billing Cycle

The number of days between your last bill and your current bill. Usually 28-31 days

FICO

Fair, Isaac & Company. Credit scoring system. A 3-digit number that creditors use to make loan approvals.

Credit Scores

300 - 550 Bad. 550 - 700 Not so Great. 700 and above Good!

Credit Limit

Cap on line of credit.

Balance

Amount if not paid off, it will incur interest charges on a daily basis.

Penalty Fees

If you go over your credit limit or make your payment late, you are likely to be charged a flat penalty fee

"Teaser" rate

Introductory or Temporary offer.

Annual Percentage Rate (APR)

Interest rate charged for balances on a credit card.

Finance Charge

Interest rate charged for borrowing money.

Fixed interest rate

Interest rate is stable. It changes only if you get a penalty.

Variable interest rate

Credit card interest rate that changes up or down depending on the Prime Lending Rate.

Balance Transfer

Program that enables cardholders to transfer credit balances from one card to another.

Secured credit

Credit with collateral (for example, a house or a car) for the lender

Unsecured credit

Credit without collateral, such as credit cards.

Closed-end credit

a loan for a specific amount that must be paid in full, plus interest, by a certain date

Open-end credit

A loan where the amount available or account balance changes as payments or withdrawals are made.

Character

Paying debt on time

Capital

What you own

Capacity

Your earning power

Experian, Transunion, Equifax

Collect personal information regarding your credit report and score

Late payments stay on your credit report

7 years

Bankruptcy stays on your credit report

10 years

Fair Credit Reporting Act

federal law giving consumers right to view and correct their credit information

Equal Credit Opportunity Act

A law that protects consumers from discrimination in the granting or denying of credit

Private label credit cards

Use only at one store

General purpose credit cards

Use at multiple different businesses

Wage garnishment

An involuntary form of wage assignment, often done by court order

Lien

A claim upon property to satisfy a debt

Chapter 7

A form of bankruptcy that requires the debtor to liquidate (sell) nonexempt property to repay creditors

Chapter 13

A form of bankruptcy that allows an individual to submit a plan to repay debts in 3 to 5 years.