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Terms
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Definitions
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A
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Annual Fees
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A yearly fee charged by credit grantors for the privilege of using a credit card.
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Annual
Percentage Rate
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The cost of credit at a yearly rate.
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Applicant
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A person applying for credit privileges, employment or some other benefit.
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Asset
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Any thing you own that has value or use.
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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 proceeding in U.S. Federal Court that may legally release a person from repaying
debts owed. The law contains several chapters which relate to different methods
of relief:
Chapter 7 - Straight Bankruptcy (total liquidation of assets)
Chapter 11 - Business Reorganizations
Chapter 12 - Farm Debt Bankruptcy
Chapter 13 - Wage Earner Repayment Plan
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Bankruptcy
Discharged
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A court order terminating bankruptcy proceedings on old debts.
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Bankruptcy
Dismissed
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A court order that denied a bankruptcy petition making the debtor still liable for
all debts.
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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 does not expect to collect the balance
owed on an account.
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Collection
Account
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An account which 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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Consolidation
Loan
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A loan usually obtained for the purpose of reducing the amount of the payments of
bills owed by consolidating the bills into one loan payment. The consumer pays off
several bills with the proceeds from one loan and is left with one consolidated
monthly payment.
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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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Consumer Credit
Counseling
Service
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Organizations which help consumers find a way to repay debts through careful budgeting
and management of funds. These are usually nonprofit organizations, funded by creditors.
By requesting that creditors accept a longer payoff period, the counseling services
can often design a successful repayment plan.
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Co-Signer
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Person responsible for repaying a debt if the borrower defaults.
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Credit
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Person responsible for repaying a debt if the borrower defaults.
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Credit Card
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A rectangular piece of plastic used instead of cash or checks authorizing payment
for goods and services.
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Credit Grantor
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Person or business furnishing 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, 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 which can be charged on a particular credit account.
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Credit Repair
Companies
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Individuals or Companies that promise to "clean-up" or "erase" a consumer's bad
credit and give him/her a fresh start. Also known as Credit Clinics.
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Credit Report
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A record or file to a prospective lender or employer on the credit standing of a
prospective borrower, used to help determine credit worthiness.
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Credit Reporting
Agency
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A company which 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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Purchases are deducted directly from the consumer's personal checking account.
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F
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Garnishment
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Legal process whereby a creditor has obtained judgment on a debt may obtain full
or partial payment by seizure of a portion of a debtor's assets (wages, bank account,
etc.).
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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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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 or lending money, usually a percentage of the amount borrowed
or loaned.
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J
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Judgment
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The official court decision of an action or suit. This public record may be listed
on a credit report in matters of money and debts owed.
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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. (A lien must be paid and
released).
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M
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Mortgage
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A lien or claim against 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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Permissible
Purposes
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As defined in section 604 of the Fair Credit Reporting Act, only the named reasons
for requesting a credit report are deemed "permissible". Requests not meeting these
criteria must be denied.
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Personal Line of
Credit
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The maximum amount one can owe at any time, based on income, debt and credit history.
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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 merchandise as a result of the customer's failure
to pay as promised. There are several types and descriptions of repossession actions.
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Revolving
Account
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An account which requires at least a specified minimum payment each month plus a
service charge on the balance. As the balance declines, the amount of the service
charge, or interest, also declines.
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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 no real risk factor for creditors and are therefore
much easier to obtain.
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Smart Card
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An electronic prepaid cash card, usually sold at banks and exchanged at face value.
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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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