Personal Finance Credit Vocabulary

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Personal Finance Credit Vocabulary
2012-01-24 19:52:08
Personal Finance Credit Vocabulary

Personal Finance Credit Vocabulary
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  1. Credit
    Receiving goods or servies now and agreeing to pay for them later
  2. Creditor
    Any entity that lends money
  3. Credit Line
    The maximum amount of money you can borrow
  4. Company Bureau
    • A company that collects the credit ratings of individuals and makes them available to credit card companies, financial institutions
    • Ex. Experian, Transunion, Equifax
  5. Credit Report
    A detailed report of an individual's credit history prepared by a credit bureau and used by a lender in determining a loan applicant's creditworthiness
  6. Credit Rating
    A measure of a person's ability and willingness to make credit payments on time
  7. Credit Score
    • A measure of credit risk calculated form a credit report using a standardized formula
    • Factors that can damage a credit score include late payments, absence of credit references and unfavorable credit card use
  8. FICO Score
    • A type of credit core that makes up a substantial portion of the credit report that lenders use to assess an applicant's credit risk and whether to extend a loan
    • Credit scoring model developed by the Fair Issac Corporation
    • A person's FICO score will range between 300 and 850
    • A FICO score above 650 indicates the person has a very good credit history
    • Scores below 620 will often find it substantially more difficult to obtain financing at a favorable rate
  9. Annual Fee
    A yearly fee associated with having a credit card is a separate fee from interest rate on purchases
  10. APR
    • Annual Percentage Rate
    • The cost of credit on a yearly basis expressed as a percentage
  11. Finance Charge
    Total dollar amount you pay to use credit
  12. Interest
    The fee charged by a lender to a borrower for the use of borrowed money
  13. Interest Rate
    A rate which is chargd or paid for the use of money
  14. Grace Period
    A time period in which no finance charges will be added to your account
  15. Co-Signing
    Assuming responsibility for someone else's payment obligation in the evet that that party defaults
  16. Principal
    The toal amount of money being borrowed or lent
  17. Bankruptcy
    A legal proceeding involving a person or business that is unable to repay outstanding debts
  18. Incentive Buying
    Premium in the form of extra merchandise, a discount or gift, offered to the prospective purchaser of an item or service
  19. 5 C's of Credit
    Character: which refers to a borrower's reputation

    Capacity: Measures a borrower's ability to repay a loan by comparing income against recurring debts

    Capital: The amount a borrower puts towad a potential investment, because a large contribution b the borrower wil lessen the chance of default

    • Collateral: Helps to secure the loan such as property or large assets
    • Conditions: Will influence the lender's desire to finance to the borrower such as the interest raet and amount of principal