| A | B |
|---|
| 20/10 rule | General "rule of thumb" that helps individuals understand how much credit they can afford; avoid borrowing more than 20 percent of your annual net income on all of your loans (not including a mortgage) and payments on those loans should not exceed 10 percent of your monthly net income. |
| Annual Fee | A yearly fee you pay for the ability to use your credit card |
| Annual Percentage Rate (APR) | The annual 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. |
| Bankruptcy | A legal proceeding involving a person or business that is unable to repay outstanding debts. |
| Billing cycle | The period of time between billings; most common cycle is monthly |
| Capacity | The ability to repay a loan from present income |
| Capital | A trait of creditworthiness that accounts for the value, marketability, and liquidity of an individual's assets and net worth |
| Cash Advance Fee | A fee you have to pay in order to receive cash through the ATM or bank. |
| Chapter 13 Bankruptcy | Also called a wage earner's plan; enables individuals with regular income to develop a plan to repay all or part of their debts. Debtors propose a repayment plan to make installments to creditors over three to five years. |
| Chapter 7 Bankruptcy | A bankruptcy proceeding in which a company stops all operations and goes completely out of business. The company's assets are liquidated (sold) and the money is used to pay off debt. |
| Character | A trait of creditworthiness that shows a responsible attitude toward paying debts |
| Closed-end credit | A loan or extension of credit in which the proceeds are dispersed in full. When the loan closes the full amount of the loan, including any interest and finance charges, must be paid by a specified date. |
| Collateral | Assets pledged to pay off a debt if payments are not made according to the contract; also called security |
| Compound interest | Interest paid on the principal of a loan and the interest owed |
| Consumer Credit Protection Act | Federal legislation that created disclosure requirements that must be followed by consumer lenders such as banks, credit card companies and auto-leasing firms. |
| Cosignor | The act of signing for another person's debt. By signing for another person's debt, the signer is legally obligated to make payment on the other persons behalf if they default |
| Credit | The opportunity to borrow money or to receive goods or services in return for a promise to pay later. |
| Credit Limit | The maximum amount a credit card company will allow someone to borrow on a single card |
| Credit rating | An assessment of the credit worthiness of a borrower |
| Credit Report | Confidential report on a consumer’s payment habits as reported by their creditors to a consumer credit reporting agency |
| Credit Score | A statistical system used to rate credit applicants according to various characteristics relevant to creditworthiness |
| Creditor | A person or company to whom money is owed. |
| Creditworthy | The ability of a consumer to receive approval for the use of credit from an establishment to which they apply |
| Debtor | A person or institution that owes a sum of money. |
| Default | The failure to meet a financial obligation |
| Delinquent | Accounts past due, required payment not made to creditor |
| Down payment | An initial payment made when something is bought on credit. |
| Durable Goods | Products that do not have to be purchased frequently (appliances, home and office furnishings, lawn and garden equipment, electronics) |
| FICO | Fair Isaac and Company, a credit score (number) between 300 and 850 that summarizes your credit risk |
| Finance charge | A fee charged for the use of credit; may be a flat fee or a percentage of borrowings. |
| Fixed-rate loans | A loan where the interest rate doesn't fluctuate during the fixed rate period of the loan. This type of loan allows the borrower to accurately predict their future payments. |
| Grace period | The time during which you are allowed to pay your credit card bill without having to pay interest |
| I = P * R * T | Formula to calculate interest owed/earned |
| Identity theft | The use of personal information to commit fraud |
| Installment credit | A contract for the loan of a specified amount, the contract issued tells the amount of purchase, the total finance charge, and the amount of each payment |
| Introductory APR | A temporary, usually low, interest rate offered by providers to "introduce" you to their services. It will usually expire after a certain amount of time. |
| Line of credit (LOC) | An open-ended, revolving loan, in which the borrower may access money up to a certain limit, pay it back and borrow it again. |
| Loan shark | A person or entity that charges borrowers interest above an established legal rate. |
| Minimum Payment | The lowest amount of money that you are required to pay on your credit card statement each month. |
| Open-end credit | A consumer credit line that can be used up to a certain limit or paid down at any time |
| Phishing | A criminal technique that uses computers to steal credit or debit card or bank account information. |
| Predatory lending | Any lending practice that imposes unfair or abusive loan terms on a borrower. It is also any practice that convinces a borrower to accept unfair terms through deceptive, coercive, exploitative or unscrupulous actions for a loan that a borrower doesn't need, doesn't want or can't afford. |
| Prime rate | The interest rate at which banks lend to their best (prime) customers; The best available interest rate under most circumstances. |
| Revolving credit | A credit agreement that allows consumers to pay all or part of the outstanding balance on a loan or credit card. As credit is paid off, it becomes available to use again |
| Simple interest | Interest paid only on the principal of a loan |
| Skimming | Criminals use a device that copies information from a credit or debit card’s magnetic strip in order to use the card illegally |
| Usury | The lending of money, especially at exorbitant interest rates. |
| Variable-rate loans | Loan made at an interest rate that fluctuates depending on a base interest rate, such as the prime rate. |
