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Terms
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Definitions
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A
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Annual Fee
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A yearly fee charged by credit grantors for the privilege of using credit.
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Annual Percentage Rate
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The cost of credit expressed as a percentage per year.
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Applicant
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A person applying for credit privileges, or some other benefit.
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Asset
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Any item you own that has economic value or use.
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Attachment
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A lien against personal property.
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Authorized Account User
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The person authorized by the contractually responsible party to use the account.
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B
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Bankruptcy
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A legal declaration of insolvency.
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Budget
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A financial plan for saving and spending money.
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C
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Charge Card
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A card which requires payment in full upon receipt of the statement.
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Charge Off
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Accounting term to indicate that the creditor has removed a loan from its balance
sheet because collection is unlikely.
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Collection Account
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An account that has been transferred from a routine debt to a Collection Department
of the creditor's firm or to a separate professional debt collecting firm.
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Collateral
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Property acceptable as security for a loan or other obligation.
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Consumer
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Person who uses and/or buys goods and services for family or personal use.
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Credit
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A trust or a promise to pay later for goods or services purchased today.
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Credit Card
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A payment card issued for making retail purchases or obtaining a cash advance from
a credit line.
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Credit Grantor
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Person or business that loans money or furnishes consumer goods and/or services
on credit.
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Credit History
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Record of how a consumer has paid credit accounts in the past that can be used as
a guide to determine whether the consumer is likely to pay accounts on time in the
future.
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Credit Limit
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The maximum amount of money that can be charged on a particular credit account.
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Credit Report
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A record or file to a prospective lender on the credit history of a prospective
borrower that is used to help determine credit worthiness.
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Credit Reporting Agency
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A company that gathers, files and sells information to creditors and/or employers
to facilitate their decisions to extend credit or to hire.
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D
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Debit Card
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A bank card that draws funds directly from the consumer's personal deposit account
as opposed to a line of credit.
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E
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Equal Credit Opportunity Act
(ECOA)
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A federal law that requires lenders and other creditors to make credit equally available
without discrimination based on race, color, religion, national origin, age, sex,
marital status, or receipt of income from public assistance programs.
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Equifax
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One of the three major credit reporting agencies, headquartered in Atlanta, Georgia.
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Experian
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One of the three major credit reporting agencies, formerly known as TRW.
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F
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Fair Credit Reporting Act
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A federal law, established in 1971, and revised in 1997, which enables consumers
to learn what information Credit Reporting Agencies have on file about them, and
to dispute inaccurate data in the file. It also establishes specific permissible
purposes for which credit reports may be requested, and places time limits on how
long adverse information may be reported.
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Fees
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An amount charged by a creditor for services it provides. Below are some common
credit card fees. Other fees may also be charged. Be sure to read all disclosures
when applying for credit.
- Annual fee. A fee charged for the privilege of using credit. Some cards that offer
rewards (for example, airline miles or travel awards) charge an annual fee.
- Balance transfer fee. A fee charged for moving balances from one credit card to
another. This fee is usually a percentage of the balance transferred. It might have
a minimum and a maximum limit.
- Cash advance fee. A fee charged for accessing cash through an automatic teller machine
(ATM) or at a bank with your credit card, you are usually charged a transaction
fee. The advance often carries a higher interest rate than regular purchases.
- Late fee. A fee charged for payments that are not received by their due date. If
you are mailing a payment you should send it at least five days before it is due
to avoid a late fee.
- Over-the-limit fee. A fee that is applied if your outstanding charges exceed your
credit limit.
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Interest Charge
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The interest charge is the cost of credit. It includes interest, certain service
charges and transaction fees. This charge is calculated on your balance using different
methods.
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Foreclosure
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A legal proceeding initiated by a creditor to take possession of collateral that
secured a defaulted loan.
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G
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Garnishment
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A process initiated by a court order through which a lender can obtain money owed
to a borrower who has defaulted on a loan, directly from a third party.
For Example, a borrower's employer can be required to pay a portion of the borrower's
paycheck directly to creditors that have obtained a judgment against the borrower.
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Grace Period
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The period allowed to avoid any interest charges by paying off the balance in full
before the due date.
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H
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Home Equity Loan
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A loan that can typically be used for any purpose that is secured by a mortgage
on the borrower's home.
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I
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Installment Loan
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A credit account in which the amount of the payment and the number of payments are
predetermined or fixed.
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Interest
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The cost of borrowing money that is usually expressed as a percentage of the amount
borrowed.
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J
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Judgment
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A legal determination made by a court of law that may result in a legal claim or
lien against the property of another.
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L
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Lease
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A written document containing the conditions under which the possession and use
of real and/or personal property are given by the owner to another for a stated
period and for a stated consideration.
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Lien
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A legal hold or claim of one person on the property of another as security for a
debt or charge. The right given by law to satisfy debt.
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Line of Credit
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A commitment by a bank to lend funds to a borrower up to a specified amount over
a specified future period.
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M
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Minimum Payment
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The minimum payment is the minimum dollar amount that must be paid each month. On
a credit card account, the minimum payment can be as little as two to three percent
of the amount owed and is often based on the balance on the billing date.
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Mortgage
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A security interest in real property given by the buyer to the lender as security
for money borrowed. 1st Mortgage-Also known as the "primary" mortgage-has priority
over the claims of subsequent lenders for the same property.
2nd Mortgage-Also know as the "secondary" mortgage-is a loan secured by mortgage
or trust deed, which lien is "junior" to another mortgage or trust.
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P
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Personal Loan
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A loan based on a consumer's income, debt and credit history.
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Principal
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The outstanding balance of a loan, exclusive of interest and other charges.
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Public Record
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Information obtained by the Credit Reporting Agency from court records, such as
liens, bankruptcy filings and judgments. Public records are open to any person who
requests them.
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R
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Repossession
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Forced or voluntary surrender of collateral as a result of the borrower's failure
to repay a loan. There are several types and descriptions of repossession actions.
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Revolving Account
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A credit account that usually requires at least a specified minimum payment each
month plus a Interest charge on the balance. As the balance declines, the amount
of the Interest charge, or interest, may also decline.
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S
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Secured Credit Card
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A credit card secured by a savings account that has been established in advance
by the borrower. The amount in the account usually determines the limit on the credit
card. These accounts present limited risk for creditors and are, therefore, much
easier to obtain than unsecured credit.
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T
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Trans Union
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One of the three major Credit Reporting Agencies.
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