GLOSSARY Adverse Action Notice – A notice that you have been denied credit, employment, insurance or other benefits based on information in a credit report. The notice should indicate which credit reporting agency was used and how to contact them. You are entitled to a free credit report if you have been denied credit in the last 60 days. Appraisal Fee - The charge for estimating the value of property offered as security. Arrears - Funds that are unpaid although due to be paid. A debtor in “arrears” is behind on payments. Asset - Any item of economic value owned by an individual especially that which could be converted to cash. Examples are cash, securities, accounts receivable, inventory, office equipment, a house, a car, and other property. Authorized User - A person who is sharing a credit card and has the right to use it, but does not have responsibility for payment. Automatic stay - When a debtor files for bankruptcy the "automatic stay" goes into effect. Creditors are automatically stopped from taking action against the debtor. This means no communication between the creditor and debtor, prevents any creditor from continuing any lawsuit, collection action, wage garnishment, foreclosure, or any other arsenal the creditor is using against the debtor. Automated Teller Machines (ATMs) - Electronic terminals located on bank premises or elsewhere, through which customers of financial institutions may make deposits, withdrawals, or other transactions as they would through a bank teller. Balloon Payment - A large extra payment that may be charged at the end of a loan or lease. Bankruptcy - A serious legal proceeding, when a debtor is unable to pay his debts as they become due. There are two types of bankruptcies used by consumers-Chapter 7 and Chapter 13. These legal actions stay on a credit score/report for 10 years. Bankruptcy code - The bankruptcy code refers to the Federal Bankruptcy Law. Beacon Score - A credit score that is computed from an Equifax credit report, based on scoring models developed by Equifax and Fair, Isaac and Company, Inc. Billing Error - Any mistake in your monthly statement as defined by the Fair Credit Billing Act. Business Days - Check with your institution to find out what days it counts as business days under the Truth in Lending and Electronic Fund Transfer Acts. Charge-offs - Occur when the creditor writes off the account, instead of turning it over to collections. Debtors are still liable for charge-offs. Collateral - Property, such as stocks, bonds or a car, offered to support a loan. These are subject to seizure if you default on a loan. Collection accounts - Accounts that have not had any activity for three to six months or longer. Co-signer/Co-maker - Another person who signs your loan and assumes equal responsibility for it. Consumer Disclosure – Your credit report is called a consumer disclosure when it is provided directly to you as it discloses, to you, the contents of your credit file. Consumer disclosures are recorded as soft inquiries. They do not affect your credit or credit score. The fact that you have looked at your credit is not revealed to lenders, landlords or employers. Consumer Reporting Agency – A consumer reporting agency is a company that gathers and stores personal credit histories, and provides credit reports upon request to its customers. The three main credit reporting agencies (CRA’s) are Equifax, Experian and Trans Union. Credit reporting agencies are subject to the Fair Credit Reporting Act, and they take care to ensure that their customers are legitimate businesses and financial institutions having a permissible purpose to request credit reports. Consumer Statement – If a dispute over a credit report item is not resolved to the consumer’s satisfaction, a short message can be added to the credit report to express the consumer’s disagreement with the reported item. Contract for deed - A method of selling and financing real estate. The buyer takes possession of the home while making payments to the seller. The seller holds legal title until the contract is paid off or converted to a deed of trust. Contract for deed is also referred to as a land contract or installment contract. Credit - The right granted by a creditor to pay in the future to buy or borrow in the present; a sum of money due a person or business. Credit Bureaus - Clearing houses of information. In the business of making money by selling information about you to lending institutions, insurance companies, renters, employers and to you. These are some of the same sources they use to obtain data about you. Whenever you fill out a credit application, the information is reported to the credit bureaus. The three largest credit bureaus: Experian, Equifax, and Trans Union. Credit Card - Any card, plate, or coupon book used periodically or repeatedly to borrow money or buy goods or services on credit. Credit Grade - All of your credit is graded together (bundled) to create a score. The grades are determined by the history of mortgage payments, installment loans, revolving credit, charge offs-liens, judgments, bankruptcy, foreclosure and maximum debt to income ranging from 45-50%. The grades are: A+, A1, A2, B, C1, C2 and D. The higher the letter score (A+), then the better the loan terms and the lower the interest rates you will qualify for. The lower the letter grade score you achieve (D), the higher the mortgage interest rate. Credit Grantor – Credit Grantor is a general term to describe a company or individual that accepts risk by lending money or allowing the use of valuable property. Credit reports are designed to help credit grantors decide whether or not a consumer can be trusted to honor the terms of an agreement. Credit Report - A file used to evaluate a person's history of debt repayment. Also, referred to as your Credit Profile or Credit File. Credit History -The record of how you've borrowed and repaid debts. Creditor - A person or business from whom you borrow or to whom you owe money. Credit Insurance - Health, life, accident, or disruption of income insurance designed to pay the outstanding balance of debt. Credit Scoring System - A statistical system used to rate credit applicants according to various characteristics relevant to creditworthiness. Loans (home and car) and insurance premiums are affected by credit scores. Minimum credit score is 350 and the highest is 800. The average bankable mortgage loan with a medium interest rate is 620. The higher your credit score, the lower the interest rate. Credit-worthiness – The ability of a person to obtain credit from a financial institution based on that person’s past, present and future (albeit extrapolated) ability to repay debts. Debit Card (EFT Card) - A plastic card, looks similar to a credit card that consumers may use at an ATM or to make purchases, withdrawals, or other types of electronic fund transfers. Default - Failure to repay a loan or otherwise meet the terms of your credit agreement. Derogatory - Negative information on a credit report. Disclosures - Information that must be given to consumers about their financial dealings. Debt to income ratio or (Debt ratio) - Total monthly payments divided by gross monthly income. A creditor will add up total monthly payments on your credit report and any other monthly payment you put on the loan application. As a general guideline, a debt ratio of 38% or below is good and a debt ratio above 45% may indicate that the individual is over- extended. Debit card - Using a debt card is like writing a check. When you make a purchase or take out a cash advance, the money is automatically taken out of your checking account. Debtor - One owing a debt; one who uses credit card loans, owes money on a personal loan, or is paying on a home mortgage. Deed of Trust - A legal instrument used in many states for real property. There are three parties to the instrument: the borrower, the trustee, and mortgage company or lender. A deed of trust is like a mortgage; several states treat a deed of trust the same as a mortgage. Default - The failure to perform an obligation as agreed in a contract. Deficiency balance - The result of a collateralized loan that was repossessed or foreclosed. A debt is still owed the creditor for the difference (what the collateral was sold for and what you owed the creditor) In bankruptcy, deficiency balances can be discharged. Delinquencies - Late payments made 30 to 180 days after the due dates. Discharge - Debt that is erased by the bankruptcy court. After the bankruptcy court discharges your debt, the debtor is no longer liable for the debt. Dischargeable debt - Debt that is erased by the bankruptcy court. Disputed - Failure to do something required by duty or law, a failure to pay financial debts, failure to appear at the required time in a legal proceeding Down Payment - Money paid to make up the difference between the purchase price and the mortgage amount. Elderly Applicant - a person 62 or older, as defined in the Equal Credit Opportunity Act. Electronic Fund Transfer (EFT) Systems - A variety of systems and technologies for transferring funds electronically rather than by check. Empirica Score – A credit score that is computed from a Trans Union credit report, based on scoring models developed by Trans Union and Fair, Isaac and Company, Inc. Exempt property - Property you are allowed to keep if a creditor, business or individual obtains a judgment against you by favor of a lawsuit, or property you are allowed to keep if you file bankruptcy. This property is known as your state exemptions or exempt property. Exempt property is not protected from the Internal Revenue Service. Fair Credit Reporting Act - Also know as FCRA. The federal law regulating credit reporting companies like Experian, Equifax, and Trans Union. This law protects consumers' rights, such as the right to review and dispute information in their credit files. FICO - a specific branded name of a credit scoring methodology from Fair Isaac and Company. It measures a person's credit health and their ability to pay bills and manage the use of their credit cards. Finance Charge - The total dollar amount credit will cost. Foreclosure - the legal process through which a mortgaged property or home may be sold when a loan is in default. FTC - The Federal Trade Commission is the US Government Agency most responsible for regulating the credit reporting agencies. It also maintains a national database of identity theft complaints, and is active in educating consumers. Full Factual – Refers to a residential mortgage credit report, normally a tri-merge credit report used in a home loan, with direct verification of employment and other details. Gramm-Leach-Bliley Act – A law designed to protect privacy be requiring financial institutions to provide customers with annual notice of privacy policies. It imposes restrictions on the disclosure of nonpublic personal information to third parties and prohibits obtaining customer information under false pretenses. Hard Inquiry – An inquiry made by a creditor or lender with whom you have applied for credit or a loan. Hard inquiries (up to 2 years old) are part of the report that creditors and lenders see when you apply for new credit and they are used in the computation of your credit score. Header File – A header file is just the top portion of a credit report (name, addresses and identification) without information about the consumer’s credit history. Prior to the Gramm- Leach-Bliley Act, these types or reports had been widely available to bureau subscribers in need of individuals’ address updates, but without “permissible purpose” to order a full credit report. Similar reports are available now, gathered from sources separate from consumer credit files. High Balance – For an individual creditor on your credit report, High Balance (if reported) indicates the highest amount you have ever owed them. Home Equity Line of Credit - A form of open-end credit in which the home serves as collateral. Inquiries - Companies (usually creditors but sometimes employers and insurance companies) who requested a copy of your credit report during the previous two years. Every time you apply for credit you will add an inquiry to your credit report. Do not add an inquiry to your credit report unless you have to. This type of inquiry can affect your credit rating. Instant Update – Instant Update is a capability for a subscriber to quickly add derogatory information to a person’s credit, without waiting for the normal monthly. For example, after an automobile repossession, an instant update might prevent the consumer from quickly buying another car on credit. Identity Theft – A crime in which an impostor uses the name, social security number, and/or other identifying information of a victim to open credit accounts, use existing credit accounts, or otherwise acquire benefits using the victim’s identity. Identit6y thieves sometimes change the address and phone number on a victim’s accounts, ruining their credit before the 6theft has been discovered. A credit report is often the best way to discover identity theft and a security alert on one’s credit report is often the best way to prevent further occurrences when fraud has been discovered. Promotional Inquiries - Businesses not reported to companies requesting your credit file. The majority of these businesses are credit grantors trying to sell you credit, usually by junk mail. These are promotional inquiries and do not hurt your credit file Joint Account - A credit account held by two or more people so that all can use the account and all assume legal responsibility to repay. Judgment - A judgment is the final word of the court. If you lose a lawsuit, a judgment is placed against you until you pay off the business or individual that was awarded the lawsuit. A judgment can cause your wages to be garnished or it can create a lien against any property owned by the individual or business that lost the lawsuit. Judgment Creditor - A creditor who was awarded a judgment against a debtor. Late Payment - A payment made later than agreed upon in a credit contract and on which additional charges may be imposed. Liability - A financial debt, obligation, claim, or potential loss. Lien - A claim on the property for a business or individual as security for a debt. The most common liens against a property are a judgment lien, tax lien and mechanics lien. Lease option to purchase agreement - A contract that grants the right to use the real estate for a period of time with an option to purchase before the lease expires. Lessee - The party to whom the item is leased. In a consumer lease, the lessee is you, the consumer. The lessee is required to make payments and to meet other obligations specified in the lease agreement. Lessor - The persona or organization who regularly leases, offers to lease, or arranges for the lease of the item Liability on an Account - Legal responsibility to repay debt. Maker – A person who has taken out an installment loan, with a co-maker. The maker is responsible for payment, but the co-maker acts to assure that the loan will be repaid. Manner of Payment – The repayment pattern for a tradeline on a credit report. It may indicate, month-by-month, when an account was 30, 60, 90 or 120 days last past due. Analysis could also show, for some consumers, a tendency to pay the balance in full each month or a tendency to pay only the minimum each month. No Hit – A company’s request for your credit report results in a No Hit if you are not found in the credit repository’s database, or your identifying information was specified incorrectly. Nonexempt property - Property at risk of losing if a creditor, business or individual obtains a judgment against you by favor of a lawsuit, or property you are at risk of losing if you file bankruptcy. Open-End Credit - A line of credit that may be used repeatedly, including credit cards, overdraft credit accounts, and home equity lines. Open-End Lease - A lease agreement in which the amount you owe at the end of the lease term is based on the difference between the residual value of the leased property and its and its realized value. Your lease agreement may provide for a refund of any excess if the realized value is greater than the residual value. In an open-end consumer lease, assuming you have met the use and wear standards, the residual value is considered unreasonable if it exceeds the realized value by more that three times the base monthly payment (sometimes call the "three-payment rule"). Overdraft Checking - A line of credit that allows you to write checks or draw funds with an EFT card for more than your actual balance, with an interest charge on the overdraft. Perjury - A criminal offense of making false statements under oath. Petition - A serious written request for a certain thing to be done. A bankruptcy petition is a written two-page request asking the bankruptcy court for relief from your creditors. Along with the bankruptcy petition, the debtor will have to file schedules describing the debtor's background, property, and finances. Point-of-Sale (POS) - A method by which consumers can pay for purchases by having their deposit accounts debited electronically without the use of checks. Points and Origination Fees - Fees paid to the lender for the loan. One point equals 1 percent of the loan amount. Points are usually paid in cash at closing. In some cases, the money needed to pay points can by borrowed, but doing so will increase the loan amount and the total costs. An origination fee covers the lender's work in preparing your mortgage loan. Prescreen, Pre-approved Offers – A service major credit reporting agencies provide to financial institutions which allows them to make bulk mailings of pre-approved offers of credit to selected segments of the population, based on credit score and demographic characteristics. According to the FTC’s interpretation of the Fair Credit Reporting Act, credit data cannot be used for other types of target marketing. Consumers can opt-out of prescreen offers by calling 1-888-5-OPTOUT. Priority debt - Unsecured debts that come first. Such as property taxes, wages, income taxes, student loans, child support and other claims of this nature. A debtor is usually liable for these debts under any circumstances. Public records information - Obtained from the public records office or County Court House such as criminal records, birth and death certificates, deeds, property tax records, lawsuits, judgments, bankruptcy, liens, child support delinquencies, and items of this nature. This is information that goes through the courts and is open to the public. RMCR – RMCR refers to a residential mortgage credit report, normally a tri-merge credit report used in a home loan. Realized Value - (1) The price the lessor or assignee receives for the leased item at disposition, (2) the highest offer for the leased item at disposition, or (3) the fair market value of the leased item at termination. The realized value may be either the wholesale or the retail value as specified in the lease agreement. Reaffirm - In bankruptcy the debt is not discharged. If a debtor desires to keep secured property the debtor reaffirms to the creditor in writing. After the debt is affirmed, it survives the bankruptcy and is collectable under ordinary state law after the bankruptcy is over. If the debtor does not pay the remaining unpaid balance, the creditor can repossess upon default. Redemption - Paying a secured creditor a lump sum payment in exchange for release of their claim (lien) against the collateral. Rescission - The cancellation of a contract. Security - Property pledged to the creditor in case of a default on a loan; see collateral. Security Interest -The creditor's right to take property or a portion of property offered as security. Secured credit card - A credit card guaranteed by money (usually a savings account is used as a security deposit). If not paid as agreed, the bank will take the money from the savings account. A secured credit card is one of the easiest and most common ways to re- establish credit. Secured debt - Money loaned for a specific item. That item will be known as collateral. Such loans include car loans or home mortgages. The creditor may repossess the collateral if the loan is not correctly paid off. Service Charge - A component of some finance charges, such as the fee for triggering an overdraft checking account into use. Single-Bureau Credit Report – A single-bureau credit report is a credit report from just one of the three nationwide credit-reporting agencies. Soft Inquiry – An inquiry that is recorded when you request your own credit report or when your employer requests it. Soft inquiries are not revealed to creditors and lenders and they do no affect your credit score. Statute of limitations - A limit on the amount of time a creditor has to sue if a debt goes unpaid. Almost every type of action under civil or criminal law has a statute of limitations. Standard mortgage - Common agreement, when a lending institution does the financing for real estate. A standard mortgage includes conventional loans, residential loans insured by FHA or guaranteed VA loans. Subscriber – The customers of a credit-reporting agency are often called subscribers. Banks, mortgage companies, auto dealers, credit card issuers, insurance companies, apartment management companies and collection agencies are all examples of subscribers. Title insurance - A policy issued by a title company that guarantees ownership in the home (real estate) you purchased. Tradeline – A tradeline is an item on your credit report referring to one of your past or present credit relationships. Tradelines normally include credit cards, mortgages, leases and other loans. You will have a separate tradeline for each account or credit card number, whether open or closed. (Rent and utilities are not normally listed as tradelines unless they are in collection.) Tri-merge – A tri-merge is a credit report that combines the credit reports from all three bureaus (Equifax, Experian and Trans Union.) Tradelines are arranged so that the same accounts, as reported by three bureaus, can be viewed next to one another and differences noted. Tri-merged credit reports are commonly used in mortgage lending decisions. Trustee - One who holds legal title to property for the benefit of another. In bankruptcy, the "bankruptcy trustee" is appointed to take legal title of the debtor's property or money and distribute it equally among the creditors. Unsecured debt - Includes credit card debt, medical bills, personal loans or any loan that required just a signature and that is not a priority debt. These loans require no collateral and are the easiest to negotiate or discharge. In bankruptcy, unsecured debt- including credit card debt-can be dischargeable debt. In bankruptcy unsecured debt can be erased or discharged by the bankruptcy court. Wage attachment - When a judgment creditor asks the court to garnish wages. The sheriff will deliver the orders to the employer. The employee risk losing a job if the employer receives two separate wage attachments. Most states limit how much of your wages can be garnished. Also known as Wage Garnishment.