credit terminology

Question 1

Adverse Action

Answer 1

An unfavorable action, such as the denial of credit, insurance or
employment, taken by a creditor or other entity, affecting a consumer. Under the Fair Credit Reporting Act (FCRA), creditors must disclose the reasons for any adverse action.

Question 2

Bankruptcy

Answer 2

A legal proceeding that relieves you of the responsibility of paying your debts or provides you with protection while attempting to repay your debts.

Question 3

Bankruptcy Discharge

Answer 3

The release, by the Bankruptcy Court, of the debtor from all of
his dischargeable debts, whether then payable or not. A permanent injunction against any collection action for pre–filing dischargeable debts. The goal a debtor seeks when filing for bankruptcy protection.

Question 4

Bankruptcy Dismissed

Answer 4

An order by the Bankruptcy Court terminating a specific bankruptcy case. Creditors may resume collection efforts upon dismissal of the debtor’s case

Question 5

Chapter 7 Bankruptcy

Answer 5

The chapter of the Bankruptcy Code that provides for court administered liquidation of the assets of a financially troubled individual or business.

Question 6

Chapter 11 Bankruptcy

Answer 6

The chapter of the Bankruptcy Code that is usually used for the
reorganization of a financially troubled business. Used as an alternative to liquidation under Chapter 7.

Question 7

Chapter 13 Bankruptcy

Answer 7

The chapter of the Bankruptcy Code in which debtors repay debts according to a plan accepted by the debtor, the creditors, and the court.

Question 8

Charge Card

Answer 8

A credit card that requires full payment of the bill each month; no interest is charged. The Discover Card is an example.

Question 9

Charge-Off

Answer 9

A loan or credit card debt written off as uncollectible from the borrower. The debt, however, remains valid and subject to collection.

Question 10

ChexSystems

Answer 10

ChexSystems is a check verification service and consumer credit reporting agency owned by the eFunds subsidiary of Fidelity
National Information Services. It provides information about the use of deposit accounts by consumers.

Question 11

Closed by Grantor

Answer 11

A credit account that has been closed at the grantor’s request wherein a creditor cancels your charge privileges.

Question 12

Collection

Answer 12

When a borrower falls behind, the lender contacts them in an effort to bring the loan current. The loan goes to “collection.”

Question 13

Consumer Financial Protection Bureau

Answer 13

The Consumer Financial Protection Bureau (CFPB) is an agency of the United States government responsible for consumer protection in the financial sector. CFPB jurisdiction includes banks, credit unions, securities firms, payday lenders, mortgage servicing operations, foreclosure relief services, debt collectors and other financial companies operating in the United States.

Question 14

Consumer Reporting Agency (CRA)

Answer 14

An agency that is a clearinghouse for information on the credit payment history of individuals or firms. There are three major credit bureaus, Equifax, Experian and TransUnion, and they are regulated by the federal Fair Credit Reporting Act (FCRA).

Question 15

Credit Card

Answer 15

A card that allows a consumer to pay a portion or all of the outstanding amount each month and has a credit limit. Visa, MasterCard, and Discover are examples.

Question 16

Credit History

Answer 16

The record of a consumer’s credit accounts and manner of payment (MOP). Credit history includes high credit, current balance, credit limit, and 24 months or more of MOP history.

Question 17

Credit Inquiries

Answer 17

Credit inquiries are a notation listed on your credit report that a
lender has checked your credit file. “Hard” inquiries can impact your Credit Score, while “soft” ones don’t. Creditors see only your “Hard” inquiries.

Question 18

Credit Limit

Answer 18

The maximum amount you are allowed to borrow from a lender under the terms of your agreement for an account.

Question 19

Credit Repair

Answer 19

Credit repair is a general term used to describe the practice of
improving or rehabilitating one’s financial reputation (creditworthiness) with creditors.

Question 20

Credit Risk

Answer 20

An assessment of a consumer’s likelihood of fulfilling the terms of a credit agreement.

Question 21

Current Balance

Answer 21

(a) the unpaid balance for each account;
(b) the Account balance, which does not include any finance or late charges assessed after Charge–off Date.

Question 22

Date Closed

Answer 22

The date when a credit agreement or account was terminated.

Question 23

Date Opened

Answer 23

The date when a credit agreement or account was established.

Question 24

Date of Last Activity (DOLA)

Answer 24

The date when one of three things happens on any active account: the consumer makes a payment, misses a payment, or the balance of the account increases

Question 25

Debt Consolidation

Answer 25

Debt consolidation entails taking out one loan to pay off many
others. This is often done to secure a lower interest rate, secure a fixed interest rate or for the convenience of servicing only one loan.

Question 26

Debt Settlement

Answer 26

A process to reduce or pay off old debt by negotiating a lower amount due with the creditor.

Question 27

Debt-to-Income Ratio

Answer 27

Your income compared to the debt you owe.

Question 28

Default

Answer 28

Failure to fulfill an agreed-upon financial obligation, such as making a loan payment.

Question 29

Fair Credit Billing Act (FCBA)

Answer 29

This Act, amending the Truth in Lending Act, requires prompt written acknowledgment of consumer billing complaints and investigation of billing errors by creditors. The amendment
prohibits creditors from taking actions that adversely affect the consumer’s credit standing until an investigation is completed, and affords other protection during disputes. The amendment also requires that creditors promptly post payments to the consumer’s account, and either refund overpayments or credit them to the consumer’s account

Question 29

Fair and Accurate Credit Transactions Act (FACTA)

Answer 29

A federal law that amended the federal Fair Credit Reporting Act
in many areas. The law provided, among other things, additional
protections for consumers in connection with the prevention and
remediation of identity theft and the accuracy of credit reports. It includes your right to a free copy of your credit report from each of the three major credit reporting agencies every 12 months, which must be requested through the centralized source established under the FACT Act.

Question 30

Fair Credit Reporting Act (FCRA)

Answer 30

Fair Credit Reporting Act (effective April 25, 1971) is part of a group of acts in the Federal Consumer Credit Protection Act. The Act protects information collected by consumer reporting agencies such as credit bureaus, medical information companies and tenant screening services. Information in a consumer report cannot be provided to anyone who does not have a purpose specified in the Act. Companies that provide information to consumer reporting agencies also have specific legal obligations, including the duty to investigate disputed information.

Question 31

Fair Debt Collection Practices Act (FDCPA)

Answer 31

Under this Act (Title VIII of the Consumer Credit Protection Act), third-party debt collectors are prohibited from employing deceptive
or abusive conduct in the collection of consumer debts incurred for
personal, family, or household purposes. Debt collectors may not contact debtors at odd hours, subject them to repeated telephone calls, threaten legal action that is not actually contemplated, or reveal to other persons the existence of debts.

Question 32

Finance Charges

Answer 32

The amount you are charged to use credit.

Question 33

Fixed-Rate Mortgage

Answer 33

A mortgage where the interest rate of the loan remains the same over the life of the loan.

Question 34

Foreclosure

Answer 34

The legal process by which a lender, usually a bank or other financial institution, acquires real property because the borrower failed to pay the mortgage.

Question 35

Freeze

Answer 35

Also known as a security freeze, you restrict access to your credit
report, which in turn makes it more difficult for creditors to see your credit report.

Question 36

Furnishers

Question 37

Installment Loan

Answer 37

An examination of a consumer’s credit history. When your credit
report is made available to another party, such as a lender, landlord or insurer.

Question 38

Grace Period

Answer 38

The number of days between a statement due date and the payment due date during which you do not incur finance charges

Question 39

HIPAA

Answer 39

HIPAA is the acronym for the Health Insurance Portability and
Accountability Act that was passed by Congress in 1996. HIPAA Mandates industry-wide standards for healthcare information on electronic billing and other processes; and requires the protection and confidential handling of protected health information.

Question 40

Last Contact Date

Answer 40

The date when the debtor or the debtor’s legal representative last responded, either by a written or verbal response, to debt collection action.

Question 41

Metro 2

Answer 41

Metro 2 is a data specification created by the Consumer Data
Industry Association for credit reporting data furnishers (who are members of the credit bureau with a data furnishing service agreement) to report consumers’ credit history information to major credit bureaus electronically and in a standardized format.

Question 42

Open account

Answer 42

An account that is active or still being paid.

Question 43

Paid as agreed

Answer 43

A designation on the credit report that indicates the consumer is
repaying the credit account according to the terms of the credit agreement.

Question 44

Permissible Purpose

Answer 44

As defined in 604 of the Fair Credit Reporting Act (FCRA), only specific reasons for requesting a credit report are deemed “permissible.” Requests not meeting this criteria must be denied.

Question 45

Principal

Answer 45

The outstanding balance of a loan, exclusive of interest and other charges.

Question 46

Points

Answer 46

Fees paid to a lender for a loan. They are often linked to the interest rate and are generally used to lower the interest rate of the loan.

Question 47

Preapproval

Answer 47

When a mortgage lender reviews your credit and commits to a specific loan amount.

Question 48

Prequalification

Answer 48

When a mortgage lender reviews your credit history, income, assets and liabilities in order to determine an appropriate loan amount.

Question 49

Principal Balance

Answer 49

Defined as account principal and other legally collectible costs, expenses, and interest accrued prior to the Charge–off Date, less payments or settlements since charge off, if any.

Question 50

Public Record

Answer 50

Information obtained from court records about such things as state or federal tax liens, bankruptcy filings and judgments against you in civil actions. Public records are open to any person who requests them.

Question 51

Re-aged Account

Answer 51

An account that is brought to a current status, even though the total past due amount has not been paid. Some unscrupulous companies may do this in order to start the Date of Last Activity over again, to reset the typical 7-year clock for a negative item to automatically fall off your credit report.

Question 52

Revolving Balance

Answer 52

The total balance of all revolving credit accounts.

Question 53

Revolving Charge Account

Answer 53

Credit automatically available up to a predetermined limit so long as a consumer makes regular payments.

Question 54

Revolving Credit

Answer 54

An account that requires at least a specified minimum payment
each month plus a service charge on the balance, which can fluctuate up to the credit limit. As the balance declines, the amount of the service charge, or interest, also declines.

Question 55

Secured Credit Card

Answer 55

A credit card secured by a savings account.

Question 56

Settled In Full

Answer 56

The Debtor has satisfied the Account obligation with full payment of the amount due.

Question 57

Term

Answer 57

The amount of time in which a loan must be repaid in full.

Question 58

Variable Rate

Answer 58

A variable rate is an interest rate that may fluctuate over the life of a loan, typically in response to changes in the interest rate marketplace.

Question 58

VantageScore®

Answer 58

First announced in March 2006, VantageScore® is the latest addition in consumer credit scoring models. Its methodologies and algorithms were cooperatively developed by the three major consumer reporting agencies: Equifax, Experian, and TransUnion. VantageScores® range from 501 - 900.