Important

Terms

… and what they mean.

  • A statistical number that evaluates a consumer’s creditworthiness, based on credit history. Lenders use this score in an effort to predict the probability that a consumer will repay his or her debts.

  • A company that collects information relating to the credit ratings of consumers and makes it available to credit card companies, financial institutions, etc. The three major credit bureaus are Equifax, Transunion and Experian.

  • A detailed report of a consumer’s credit history, prepared by a credit bureau. Lenders use the reports, along with other details, to determine a loan applicant’s creditworthiness.

  • A loan that is backed with collateral.

  • A loan which, when unpaid, cannot be reclaimed through the seizure of an asset.

  • A loan with specified monthly payments, terms and interest, where the consumer borrows a fixed sum of money and agrees to make monthly payments of a set dollar amount until the loan is paid off, a period of months or years.

  • A type of credit that can be used repeatedly up to a certain limit, so long as the account is open and payments are made on time. The amount of available credit, the balance and the minimum payment can go up and down depending on the purchases and payments made.

  • The charge for the privilege of borrowing money, typically expressed as a percentage.

  • APR is expressed as a percentage that represents the actual yearly cost of funds over the term of the loan. This includes any fees or additional costs associated with the transaction, but does not take compounding into account.

  • An up-front payment paid out of pocket, often as a part of a loan.

  • A legally enforceable agreement between two parties for the purchase or sale of goods and services.

  • The least amount a consumer needs to pay monthly to avoid late fees and have a good repayment history on their credit report. Calculated as a small percentage of the consumer’s total credit balance.

  • Making a payment larger than the specified amount in order to retire a loan before the term. Usually resulting in savings due to proration of interest and or fees.