Things to Know in the Credit World
Bankruptcy - A proceeding in U.S. Bankruptcy Court that may legally release a person from repaying debts owed. Credit reports normally include bankruptcies for up to 10 years.
Charge-off- The balance on a credit obligation that a lender no longer expects to be repaid and writes off as a bad debt.
Collection - Attempted recovery of a past-due credit obligation by a collection department or agency.
Credit bureau- A credit reporting agency that is a clearinghouse for information on the credit rating of individuals or firms. Is often called a “credit repository” or a “consumer reporting agency”. The three largest credit bureaus in the U.S. are Equifax, Experian and TransUnion.
Credit history - A record of how a consumer has repaid credit obligations in the past.
Credit report - Information communicated by a credit reporting agency that bears on a consumer's credit standing. Most credit reports include: consumer name, address, credit history, inquiries, collection records, and any public records such as bankruptcy filings and tax liens.
Credit score - This term is often used to refer to credit bureau risk scores. It broadly refers to a number generated by a statistical model which is used to objectively evaluate information that pertains to making a credit decision.
Default - A failure to make a loan or debt payment when due. Usually an account is considered to be “in default” after being delinquent for several consecutive 30-day billing cycles.
Delinquent - A failure to deliver even the minimum payment on a loan or debt payment on or before the time agreed. Accounts are often referred to as 30, 60, 90 or 120 days delinquent because most lenders have monthly payment cycles.
Fair Credit Reporting Act (FCRA) - Federal legislation that promotes the accuracy, confidentiality and proper use of information in the files of every “consumer reporting agency”. The FCRA was enacted in 1970.
FICO® - ScoresCredit bureau risk scores produced from models developed by Fair Isaac Corporation are commonly known as FICO Scores. FICO Scores are used by lenders and others to assess the credit risk of prospective borrowers or existing customers, in order to help make credit and marketing decisions. These scores are derived solely from the information available on credit bureau reports.
Inquiry - An item on a consumer's credit report that shows that someone with a “permissible purpose” (under FCRA rules) has previously requested a copy of the consumer's report. Fair Isaac credit bureau risk scores take into account only inquiries resulting from a consumer's application for credit.
Late payment - A delinquent payment; a failure to deliver a loan or debt payment on or before the time agreed.
Revolving debt - Debt owed on an account that the borrower can repeatedly use and pay back without having to reapply every time credit is used. Credit cards are the most common type of revolving account.