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Financial Terms

Annual Fee - Credit card issuers often (but not always) require you to pay a special charge once a year for the use of their service, usually between $15 and $55.

Annual Percentage Rate (APR) – A measure of how much interest credit will cost you, expressed as an annual percentage.

Balloon Payments - A loan with a balloon payment requires that a single, lump-sum payment be made at the end of the loan.

Budget/Spending Plan - A written plan that helps people manage their money. Tool commonly used to measure expenses against income.

Capacity - Factor in determining creditworthiness. Capacity is assessed by weighing a borrower’s earning ability and the likelihood of continuing income against the amount of debt the borrower carries at the time the application for credit is made. While capacity may be considered in a credit decision, the credit report does not contain information about earning ability or the likelihood of continuing income.

Chapter 7 Bankruptcy - Chapter of the Bankruptcy Code that provides for court administered liquidation of the assets of a financially troubled individual or business.

Chapter 11 Bankruptcy - 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. The U.S. Supreme Court has held that an individual may also use Chapter 11.

Chapter 12 Bankruptcy - Chapter of the Bankruptcy Code adopted to address the financial crisis of the nation’s farming community. Cases under this chapter are administered like Chapter 11 cases, but with special protections to meet the special conditions of family farm operations.

Chapter 13 Bankruptcy - Chapter of the Bankruptcy Code in which debtors repay debts according to a plan accepted by the debtor, the creditors and the court. Plan payments usually come from the debtor’s future income and are paid to creditors through the court system and the bankruptcy trustee.

Collateral - An asset pledged to the provider of credit until the credit obligation is paid.

Consumer Credit Counseling Service - A non-profit organization that assists consumers in dealing with their credit problems. Consumer Credit Counseling Service has offices throughout the United States that can be located by calling 800 388 CCCS (2227).

Co-signer - Person who pledges in writing as part of a credit contract to repay the debt if the borrower fails to do so. The account displays on both the borrower’s and the co-signer’s credit reports. Credit Limit/Line of Credit.

Credit - Credit for a consumer is a process involving a consumer and a provider of credit allowing a consumer to buy now and pay later. You may be looking to buy something that you really need, but don’t have the cash to pay for the purchase at that time.

Credit Report - Confidential report on a consumer’s payment habits as reported by their creditors to a consumer credit reporting agency. The agency provides the information to credit grantors who have a permissible purpose under the law to review the report.

Credit Reporting Agency - A firm that collects, sorts and sells information about an individual's credit history.

Credit Score - A numerical score that reflects – at a point in time – what your past and current credit usage predicts about your future credit performance. The better your history of credit, the higher your score.

Credit Union - A not-for-profit financial institution owned by its members. Savings are federally insured by the NCUA (National Credit Union Association) for up to $250,000 per depositor.

Creditworthiness - The ability of a consumer to receive favorable consideration and approval for the use of credit from an establishment to which they applied.

Delinquent - Accounts classified into categories according to the time past due. Common classifications are 30, 60, 90 and 120 days past due. Special classifications also include charge-off, repossession, transferred, etc.

Distributers - An individual who has membership and ability to sell products.

Dispute - If a consumer believes an item of information on their credit report is inaccurate or incomplete, they may challenge, or dispute the item. Experian will investigate and correct or remove any inaccurate information or information that cannot be verified. Experian gives consumers the option of disputing online or they may call the telephone number on their credit report for assistance.

Equal Credit Opportunity Act (ECOA) - Federal law, which prohibits creditors from discriminating against credit applicants on the basis of sex, marital status, race, color, religion, age, and/or receipt of public assistance.

Equifax - One of the three national credit reporting agencies, headquartered in Atlanta, Ga. The other two are Experian and TransUnion.

Experian - One of the three national credit reporting agencies, with U.S. headquarters in Costa Mesa, CA. The other two are Equifax and TransUnion.

Federal Trade Commission (FTC) - The FTC is the nation's consumer protection agency and one of the government agencies responsible for keeping competition among businesses strong. Its job is to make sure companies compete fairly and don't mislead or trick people about their products and services.

Fees - Charges for various services or activities. For example, some credit cards charge you a fee when you get a cash advance, make a late payment or go over your credit limit.

Fixed Expenses - Expenses that are due at a particular time or on a regular schedule. The amounts remain the same (such as your rent, car payment or health insurance).

Fixed Rate - An annual percentage rate that does not change.

Flexible Expenses - Expenses that are incurred by choice and are subject to change (such as hobbies and entertainment).

Grace Period - The time period you have to pay a bill in full and avoid interest charges.

Lien - Legal document used to create a security interest in another’s property. A lien is often given as a security for the payment of a debt. A lien can be placed against a consumer for failure to pay the city, county, state or federal government money that is owed. It means that the consumer’s property is being used as collateral during repayment of the money that is owed.

Multilevel Marketing -In multilevel or network marketing, individuals sell products to the public — often by word of mouth and direct sales. Typically, distributors earn commissions, not only for their own sales, but also for sales made by the people they recruit.

National Consumers League (NCL) - The NCL is a private, nonprofit advocacy group representing consumers on marketplace and workplace issues. The NCL provides government, businesses, and other organizations with the consumer's perspective on concerns including child labor, privacy, food safety, and medication information.

Nest Egg - A substantial sum of money that has been saved or invested for a specific purpose. A nest egg is generally earmarked for longer-term objectives, the most common being retirement, buying a home and education.

Personal Information - Information on your personal credit report associated with your records that has been reported to us by you, your creditors and other sources. It may include name variations, your driver’s license number, Social Security number variations, your date or year of birth, your spouse’s name, your employers, your telephone numbers, and information about your residence.

Pyramid Scheme - An illegal business operation in which individuals are lured into believing that they’ll make large amounts of money by investing money into the company before they can begin selling.

Repossession - A creditor’s taking possession of property pledged as collateral on a loan contract on which a borrower has fallen significantly behind in payments.

Secured Credit - Loan for which some form of acceptable collateral, such as a house or automobile has been pledged.

Security Alert - Statement that is added once Experian is notified that a consumer may be a victim of fraud. It remains on file for 90 days and requests that a creditor request proof of identification before granting credit in that person’s name.

TransUnion - One of three national credit reporting agencies. The other two are Experian and Equifax. Truth in Lending Act

Unexpected Expenses - This type of expense includes items that we spend money on that occur only once in a while and by surprise, but can wreak havoc on our budgets, such as home or apartment repairs, car repairs, necessary trips or medical expenses.

Unsecured Credit - Credit for which no collateral has been pledged. Loans made under this arrangement are sometimes called signature loans; in other words, a loan is granted based only on the customer’s words, through signing an agreement that the loan amount will be paid.

Variable Expenses - This type of expense occurs on a regular basis but the amounts can change (like your phone or water bill).

Variable Rate - An annual percentage rate that may change over time as the prime lending rate varies or according to your contract with the lender.

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