Personal Finance Credit Vocabulary

Receiving goods or servies now and agreeing to pay for them later

Any entity that lends money

The maximum amount of money you can borrow

• A company that collects the credit ratings of individuals and makes them available to credit card companies, financial institutions
• Ex. Experian, Transunion, Equifax

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

A measure of a person's ability and willingness to make credit payments on time

• 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

• 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

A yearly fee associated with having a credit card is a separate fee from interest rate on purchases

• Annual Percentage Rate
• The cost of credit on a yearly basis expressed as a percentage

Total dollar amount you pay to use credit

The fee charged by a lender to a borrower for the use of borrowed money

A rate which is chargd or paid for the use of money

A time period in which no finance charges will be added to your account

Assuming responsibility for someone else's payment obligation in the evet that that party defaults

The toal amount of money being borrowed or lent

A legal proceeding involving a person or business that is unable to repay outstanding debts

Premium in the form of extra merchandise, a discount or gift, offered to the prospective purchaser of an item or service

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