Glossary of Credit Terms
Application scoring
The use of a statistical model to objectively evaluate and "score" credit
applications and credit bureau data in order to assess likely future
performance. Scores help businesses make decisions such as whether to accept or
decline the application.
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 writes off as a bad debt. The
amount is still owed by the debtor.
Collection
Attempted recovery of a past-due credit obligation by a collection department or
agency.
Consumer credit file
A credit bureau record on a given individual. It may include: consumer name,
address, Social Security number, credit history, inquiries, collection records,
and public records such as bankruptcy filings and tax liens.
Credit bureau
A credit reporting agency that is a clearinghouse for information on the credit
rating of individuals. Is often called a "consumer reporting agency." The three
largest credit bureaus in the U.S. are Equifax, Experian and TransUnion.
Credit bureau risk score
A type of credit score based solely on data stored at the major credit bureaus.
It offers a snapshot of a consumer's credit risk at a particular point in time,
and rates the likelihood that the consumer will repay debts as agreed.
Credit history
A record of how a consumer has repaid credit obligations in the past.
Credit obligation
An agreement by which a person is legally bound to pay back borrowed money or
used credit.
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 risk
The likelihood that an individual will pay his or her credit obligations as
agreed. Borrowers who are more likely to pay as agreed pose less risk to
creditors and lenders.
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 make the minimum payment on a loan or debt payment on or before the
due date. Accounts are often referred to as 30, 60, 90 or 120 days delinquent
because most lenders have monthly payment cycles.
Equal Credit Opportunity Act (ECOA)
Federal legislation that prohibits discrimination in credit. The ECOA originally
was enacted in 1974 as Title VII of the Consumer Credit Protection Act.
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® scores
Credit bureau risk scores produced from models developed by Fair Isaac
Corporation are commonly known as FICO scores. Fair Isaac credit bureau 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.
Installment debt
Debt to be paid at in regular installments over a specified period. Examples of
installment debt include most mortgage and auto loans.
Late payment
A delinquent payment; a failure to make a loan or debt payment on or before the
date 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.
Score
See "credit score."
Scoring model
A statistical formula that is used, usually with the help of computers, to
estimate future performance of prospective borrowers and existing customers. A
scoring model calculates scores based on data such as information on a
consumer's credit report.
Credit Reporting Agencies
Equifax
equifax.com
PO Box 105069
Atlanta, GA 30349
1-800-525-6285Experian
experian.com
P.O. Box 9532
Allen, TX 75013
TransUnion
transunion.com
PO Box 6790
Fullerton, CA 92634
1-800-680-7289
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