Glossary of Financial Terms

APR, charge-off, delinquency, foreclosure, grace period? Finances and credit, like any other industries, use terms and acronyms exclusive to the industry. You may be used to hearing some of these words, but what do they actually mean?

There’s a lot of phrases out there, so unfortunately we may have missed a few, but hopefully we have covered the main “everyday” fundamental buzz words and phrases. We have compiled a glossary of financial terminology as a guide to help you navigate the complex world of credit and finance.

A

Acceptable Debt-to-Income Ratio — If your monthly, unsecured debt payments are less than 20% of your monthly take-home pay, you have what is generally considered to be an acceptable debt-to-income ratio. Financial institutions set their own acceptability standards, sometimes as high at 35%.

ACH Payment / Electronic Funds Transfer - Payments made online that will be reflected on your billing statement are called ACH (Automated Clearing House) Payments.

Access Checks - Access checks, also known as cash advance checks or convenience checks, are issued against a line of credit. The transaction is applied to the cash balance and a transaction fee may be applicable.

Account - An account represents a relationship between a company (the account owner) and consumer, where the consumer purchases a product or service in such a way that represents the transfer of money over time.

Account Condition - Indicates the present state of the account, but it does not indicate the payment history of the account that led to the current state. For example: open, paid, charge-off, settled, foreclosed etc.

Accounts in Good Standing - Credit items that have a positive status and may help demonstrate your creditworthiness favorably.

Account Number - A reference number assigned to accounts, by the creditor or collection agency, to uniquely identify a consumer as the borrower on that account.

Account Reviews - Inquiries made into a consumer's credit history by creditors with whom the consumer has a current relationship. These inquiries are not included in the business version of a consumer's credit report.

Activate - In order to prevent fraud, many card issuers require that you call them when you receive your new or replacement card(s) in order that they can verify that the correct person has received it. The issuer will then ?activate? the card; until this is done you cannot use the card.

Activity - Refers to any transaction that appears on your statement/bill. For example: purchases, cash advances, fees, finance charges and also payments that you have made.

Additional Cardholder/Member - Some card issuers allow you to sign on to your account, an additional cardholder/member, for example a spouse. You must remember that you are still responsible for ALL charges that the additional cardholder/member incurs to the account.

Adjustable-Rate Mortgage (ARM) — An ARM has interest rates and payments that change from time to time over the life of the loan. Depending on the type of ARM you have, your interest rate may increase gradually every few years until it reaches a preset ceiling or it may increase abruptly after a certain number of payments. When you apply for an ARM, be sure that you understand how, when and why the rates may change.

Adjustment - This is the % of the debt that is to be repaid to the credit grantors in a Chapter 13 Bankruptcy

Adjusted Balance - An adjusted balance is determined by subtracting all payments made during the billing cycle from the outstanding balance at the beginning of the billing cycle, prior to the calculation and accrual of finance charges to the account.

Advance-Fee Loan - A loan that is calculated with all the finance charges and other creditor expenses, so that those charges/fees are deducted from the amount before you receive the principal.

Adverse Action - An unfavorable action, such as the denial of credit, insurance or employment, taken by a creditor or other entity that affects a consumer. Under the Fair Credit Reporting Act, creditors must disclose the reasons for any adverse action.

Adverse Information - Information about a consumer that a creditor or other entity considers a risk or unacceptable, such as a past due account.

Affinity Card/Co-Brand - An affinity card is best described by its other name, a co-brand card. This card is offered by a lending institution in conjunction with another organization. A couple of examples are the Tiger Woods American Express Card and the General Motors Visa Card. Frequently, use of this card entitles holders to special discounts or deals.

Age Requirement - You must be at least 18 years old to qualify for credit, or you must have a parent/guardian as a co-signer.

Agent — An agent is a person who legally represents another, called a principal, and from whom the agent derives express or implied authority. In other words, an agent is someone who acts on behalf of another person, such as a real estate agent.

Agreement/Card member Agreement - This is the legal agreement between you and your creditor, the creditor will send you an agreement which details the terms and conditions that apply to your card, including: interests rates, transaction fees and the method of calculating interest.

Allocation Percentage — An allocation percentage is the amount of money—expressed as a percent—that you spend on each category of expenses in your spending plan or budget. For example, we recommend you allocate between 5% and 10% of your monthly income to savings.

Amount Due - The amount that is due for payment, usually the minimum monthly fee, including any late and/or over limit fees. This Amount Due should not be confused with ?Amount Owed/Balance?.

Amount Owed/Balance - Is the amount of money that you owe the card issuer, and includes: unpaid balance from last month, new purchases, cash advances, interest, transactions charges and fees. This Balance/Amount Owed should not be confused with ?Amount Due?.

Annual Fee - Some credit card issuers, (but not all) charge you an annual fee for using their card. The fee will vary depending on your card issuer and the application you signed.

Annual Percentage Rate (APR) - The APR is the total yearly cost of the interest on a loan, expressed as a percentage rate.

Annual Percentage Yield (APY) — The APY is the rate actually earned or paid in 1 year, taking into account the effect of compounding.

Annuities - An annuity is a contract made with an insurance company that provides for a series of payments to be received at stated intervals (usually monthly) for a fixed or variable time period. All annuities represent hybrids of investment and insurance, with earnings growing tax-free until payouts begin. As a result, they are sometimes called tax-sheltered annuities (TSAs). Although these contracts are sold by life insurance companies, annuities are often described as being the opposite of life insurance because they generally provide funds during life, not after death. Annuities can be classified as either immediate or deferred.

Applicant - The person applying for credit, employment and other benefits.

Application - The form used to apply for credit, employment and other benefits.

Appraisal — An appraisal is a written estimate of the value of something. In real estate, it is a professional opinion of the market value of property (such as a home) as of a given date.

Assessment — An assessment is a value assigned to real property (your house and land) that is used to determine property taxes. Additionally, it can be an add-on tax to raise money for a special purpose. In other words, an assessment is the way governments determine how much property tax you have to pay.

Asset - Any holding that has a monetary value or use. Houses, real estate, cars, jewelry, and stocks and bonds are considered assets.

Assumable Loan — An assumable loan is one in which the buyer assumes responsibility for repaying the unpaid balance of the original loan.

Automated Teller Machine (ATM)An ATM is a computer that lets you access your financial institution accounts to withdraw or deposit money, transfer funds from one account to another or check your account balances. (See also Electronic Funds Transfer [EFT].) If you have an account with a financial institution, you can usually use its ATMs for free. If you use another financial institution’s ATM, you may have to pay a fee to both your financial institution and the one that owns the ATM.

Authorized User - An authorized user is a person who's been given authority by a primary cardholder to make charges to that primary cardholder's account, but who doesn't have legal responsibility for repaying the account.

Automatic Payment - Payments can be transferred from your savings or checking accounts direct to the card issuer, this depend on if your card issuer offers this service and there may be an additional charge.

Available Credit - The amount of credit that is still available for you to use

Average Annual Return — The rate of return on investments averaged over a specific period of time (e.g., the past 20 years). It is determined by adding together the rates of return for each year and dividing by the number of years in the calculation.

Average Daily Balance - An average daily balance is a method of calculating finance charges on a credit account. Your finance charges are based on the amount you owe to a creditor each day during the billing period. The amount you owe includes your most recent outstanding balance plus any new charges, minus payments and credits, such as returned merchandise or refunded fees. Calculating finance charges in this manner can sometimes result in lower finance charges.

B

Back-End Debt-to-Income Ratio - Your back-end debt-to-income ratio compares your total monthly debt payments to your monthly income, and it is a widely used measure of your creditworthiness. You compute your debt-to-income ratio by dividing your monthly minimum debt payments (including your rent or mortgage and housing insurance and property taxes) by your monthly gross income.

Bad Credit Term - used to describe a poor credit rating. ?Bad Credit? can result in the denial of future credit or higher interest rates.

Balance Transfer - When an unpaid credit card debt is transferred from one issuer to another, it's known as a balance transfer.

Balance Transfer Fee - A balance transfer fee is charged to customers for making a balance transfer to discourage them from doing so.

Balance Owed - The amount of money that you owe the card issuer, and includes: unpaid balance from last month, new purchases, cash advances, interest, transactions charges and fees. This Balance/Amount Owed should not be confused with ?Amount Due?.

Balloon Mortgage — This is a mortgage with a low interest rate that stays level for a short time (typically 5–7 years), with a large, final “balloon payment” that you will either refinance or pay off in full.

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

Bank Card - A credit card issued through a bank.

Bankruptcy - A bankruptcy is a legal mechanism, the purpose of which is to modify or eliminate a person's obligation to repay certain kinds of debt in order to permit the person to get a ""clean start"" economically. Bankruptcy is a serious step for a borrower because it can severely limit access to credit for years to come. Common bankruptcy types include: The law contains several Chapters which include: Chapter 7 ? Straight Bankruptcy, Chapter 11 ? Business Reorganizations, Chapter 12 ? Farm Debt Bankruptcy, Chapter 13 ? Wage Earner Repayment Plan

Bankruptcy Code Federal - laws governing the conditions and procedures under which persons claiming inability to repay their debts can seek relief.

Bankruptcy Discharge - A court order terminating bankruptcy proceedings on old debts.

Bankruptcy Dismissed - A court order that denied the bankruptcy petition, which means that the debtor is still responsible for all of their debts.

Billing Cycle - A billing cycle is the period between billing statements, this is usually 28 to 31 days.

Billing Statement - A billing statement is sent periodically by a credit card issuer to the customer, that summarizes all transactions and other activity applicable to that credit card account, including balance, purchases, payments, credits and finance charges.

Bonds - A certificate of debt which is issued by either the government or corporations. A bond is a promise to repay a specific sum of money at a future date and carries a fixed rate of interest.

Borrower - The person who signs and agrees to the terms of the loan and who has taken responsibility to repay the loan/debt.

Bounced Check — See Overdraft.

Brokerage Firm — A brokerage firm is a financial institution that sells securities. Examples of securities include stocks and bonds.

Buyer’s Agent — A buyer’s agent acts on behalf of and represents a buyer in a real estate transaction. If you plan to buy a house, it may be wise for you to contact an agent who will have your best interests in mind and ensure you are treated fairly throughout the home buying process.

C

Canceled Check — A canceled check is stamped to show that it has been paid. Because of legal electronic transfers of money, in which an image of a check serves the same purpose that a paper check used to, canceled checks are far less common today than they used to be.

Cap (Interest) — An interest cap is a consumer safeguard on an adjustable rate mortgage (ARM) that limits the amount your interest rate can change per year and over the life of the loan.

Cap (Payment) — A payment cap is a consumer safeguard on an adjustable rate mortgage (ARM) that limits the amount your monthly payments can change.

Capacity - One of the factors used in accessing your creditworthiness. Capacity is assessed by looking at the borrowers earning ability and the likelihood of continuing income against the amount of debt the borrow has at the time of applying.

Capital Gain — A positive difference between an asset’s price when bought and its price when sold; it is the opposite of a capital loss.

Capital Loss — A negative difference between an asset’s price when bought and its price when sold; it is the opposite of a capital gain.

Cardholder Agreement - The cardholder agreement is the written statement that sets forth all of the terms and conditions applicable to a credit card account. It generally outlines the cardholder's obligations with respect to their credit card account, such as repayment, default, billing disputes and other associated terms.

Cash Advance - A cash withdrawal that you make using your credit card to obtain the money. Your card issuer will apply finance charges for the cash advance and may also apply finance charges and fees.

Cash Advance Fee - A cash advance fee is charged for using a credit card to obtain cash (generally at an ATM or bank window). This fee can be stated in terms of a flat, per-transaction fee or a percentage of the amount of the cash advance. Generally, cash advance fees do not have a grace period, which means interest accrues on the transaction from the moment the money is withdrawn.

Cash Card - A cash card has a set amount of value which can be read by a special cash card reader. Participating retailers will use the reader to debit the card in increments until the value is gone. The card is like cash - it has no built-in security, so it can be used by anyone if lost or stolen.

Cash Reserve — A lender may require that the borrower have, after settlement, at least 2 months’ mortgage payment saved, also known as the borrower’s cash reserve.

Cashier’s Check — A check issued by a financial institution, drawn on its own funds and signed by the cashier.

Certificate of Deposit (CD) - An interest earning savings instrument offered by an institution that accepts deposits for a fixed amount of time. The longer the money remains the higher the rate of interest earned.

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

Chapter 11 Bankruptcy - 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.

Chapter 12 Bankruptcy - The chapter of the Bankruptcy Code adopted to address financial difficulties of the nation's farming community.

Chapter 13 Bankruptcy - The chapter of the Bankruptcy Code in which debtors repay debts according to a plan accepted by the debtor, the creditors, and the court.

Charge Card - A charge card requires a full payment of the entire accrued balance by the due date.

Charge-Off - The creditor does not expect to collect on the debt and accepts the loss. However, collection agency will continue to solicit payments from the debtor and the debtor still owes the debt until settled.

Check Register (Ledger) — A check register is a record of all activity that happens within a checking account. The account holder is responsible for keeping a check register.

Checking Account — A checking account is one from which the account holder can write checks.

Civil Action - Any court action against a consumer to try and regain money owed.

Claim Amount - The amount awarded in a court action.

Closed Date - The date an account was closed.

Closing (in real estate) — At closing, the deed is delivered, financial adjustments are made, notes are signed and the funds necessary to consummate, or close, the sale or loan transaction are disbursed.

Closing Costs — Closing costs are costs outside a property’s sales price that must be paid to cover the cost of the transaction, such as a loan origination fee, discount points, insurance fees, survey fees, taxes, and attorneys’ fees. Closing costs vary from location to location, but they must be described to you when you submit your mortgage loan application.

Closing Date - The last day those transactions are posted to your account for that month.

Collateral - Assets that are acceptable as security for a secured loan or other obligation. For example: House, car, savings, bonds, insurance policies and jewelry. Collateral is not required for unsecured loans.

Collections - The referral of past due account(s) to a collection company or other specialist in collecting unpaid debts.

Collection Account - Refers to the status of the an account owed to a creditor when it has been passed to a collection company (as above).

Collection Agency - If you don?t pay your debts, the creditor may decide to send your debt to a collection agency. These are company?s that specialize in collecting unpaid debts. If this happens, your account may be listed as a ?collection account? on your credit report.

Co-maker (this is different to a Co-Signer) - A creditworthy co-maker is sometimes required if the applicants qualifications are marginal. The co-maker is legally responsible to repay the charges in the joint account agreement.

Commission — A commission is a fee to a third party for assisting a business transaction, such as buying or selling an asset.

Comparable Market Analysis — Properties with similar characteristics are compared with the property you want to buy to determine how much the home you want to buy is worth.

Compensation — The total wage or salary and benefits that an employee receives. (See also Income.)

Compound Interest — Compound interest is interest paid on principal plus interest paid on interest already earned.

Consolidation Loan - A loan, which allows you to consolidate several loans into one single account, with one monthly payment, with one creditor. For example: if you own a home, you can consolidate your debt into a home equity loan, or you can transfer credit card balances onto one card.

Consumer — A consumer is a person who buys or uses a product.

Convenience Check (transfer check) - Your credit card issuer may send you blank convenience checks, which allows you to shift debts onto the new card.

Conventional Loan — A conventional loan is one that is not guaranteed or insured by a government agency such as HUD or VA.

Consumer - Person who use and/or buys goods and/or services.

Copy charge (Fee/Charge) - Card issuers are required by law to provide you with copies of documents relating to your account and they may charge you a fee for this service.

Co-sign - To sign an agreement with someone, the borrower, and means that you agree to pay the debt if they do not pay

CoSigner (Joint Applicant) - A person who signs a credit card application with the primary applicant is known as the co-signer. The co-signer agrees to be legally liable for any balance incurred on the credit card, regardless of who used the card.

Credit - A consumer's ability to make purchases, obtain services, or borrow money based on his or her promise, ability, and demonstrated willingness to repay.

Credit Bureau - A company that gathers information about how consumers use credit, which the credit bureau in subsequently provides to potential creditors, employers and others who have a legally-recognized reason (permissible purpose) to inquire about the creditworthiness of an individual.

Credit Card - 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.

Credit Card Debt - The total unpaid balances on all of your credit cards.

Credit Check - An inquiry to confirm a consumer's credit payment history.

Credit Counseling - Credit counseling is professional guidance from trained credit counselors who work with an individual to help him or her get out of debt and establish a sound financial management plan.

Credit Criteria - Factors that the creditors use to determine your creditworthiness or your ability to repay the debt. They may include: number of credit accounts you have, types of credit, income and your current level of debt.

Credit Grantor - Credit Grantor — A credit grantor is a lending institution or company that extends credit to you based on your credit history and ability to repay.

Credit Fraud - A case when someone has stolen a consumer's identity by fraudulently using that consumer's social security number or other personal information to acquire credit in his or her name.

Credit History - A detailed record that shows your credit history, and how you manage your debt. It is available from the credit bureaus in the form of a credit report. The information may include: how many you have open, how many closed accounts, did you pay your accounts on time or late, did they get charged off or sent to collections, how many applications you have made for credit. Information is retained on this report for up to 10 years, and your credit history is used by creditors to determine if you should be granted new credit.

Credit Insurance - Credit insurance pays or pays off credit card debt should the borrower be unable to pay the debt as a result of the loss of employment, death or disability.

Credit Items - Information reported by current or past creditors to the credit bureaus.

Credit Limit/Credit Line - This is an amount set by the creditor and it dictates how much you can borrow/spend. A credit limit is the maximum that the creditor will allow you to charge on a credit card. Some creditors may set different credit limits on purchases and cash advances. For example: your credit limit is $5,000 and you have spent $4,000, there fore your available credit to spend is $1,000.

Credit Management - The way you handle the money you borrow.

Credit Repair - Credit repair refers to steps you might take to get outdated, incorrect or negative information removed from your credit report/file. Beware of companies offering to repair your credit for you. They usually charge very high fees for things you can do yourself for free or at a very low cost. Remember, there is no “quick fix” way to repair your credit if the information on your credit report is accurate. Also, accurate, negative information can’t be removed from your credit report unless your credit grantor agrees to have the information removed.

Credit Repair Agency — Credit repair agencies are for-profit companies that claim to “fix” your credit records. Some of these companies make unsubstantiated or illegal claims or perform work you can do yourself at little or no cost.

Credit Report - A report that details your credit history and is available from the credit bureaus. It includes your payment history, did you pay your bills on time, did they get sent to collections or charged-off. How many creditors you have and how much you owe or owed. Applications for new credit are also detailed. Creditors use this information when you apply for credit, insurances and mortgages. Employers can also use this information when you apply for a job. Information stays on your credit report for up to 10 years.

Credit Reporting Agency - A company that gathers, files and sells information about you to creditors and/or employers. In order to facilitate their decision whether to extend you credit or whether to hire you.

Credit Union - A non-profit financial cooperative, which is democratically, owned, which offers a variety of savings and lending services to its members.

Credit Risk - An assessment of a consumer's likelihood of fulfilling the terms of a credit agreement.

Credit Score/Credit Rating - A mathematical calculation that reflects a consumer's creditworthiness. The score is an assessment of how likely a consumer is to pay his or her debts.

Credit Union — Credit unions are not-for-profit co-operatives of members with some type of common bond (e.g., employer) that provide a wide array of financial services.

Creditor - Person or business to which a debt is owed.

Credit worthiness - A description of a consumer's credit behavior and management that leads to a creditor's decision whether or not to make an offer of credit.

Creeping Indebtedness — Creeping indebtedness is the gradual accumulation of unpaid debt. You can become a victim of creeping indebtedness if you make only the minimum monthly payments on your unsecured debt and keep charging. If this is how you manage your unsecured credit accounts, your debt can easily creep up to an unmanageable level.

D

Daily Periodic Rate - A daily periodic rate is an interest rate factor used by some credit grantors to calculate your interest charges on a daily basis. The rate is computed by dividing the yearly interest rate by 365 days. This method of computing interest may actually result in an annual percentage rate (APR) that is slightly higher than the stated yearly rate..

Date Closed - The date when a credit agreement or account was terminated.

Date Filed - The date that a public record was awarded.

Date of Status - The date the creditor last reported information about the account to your credit report.

Date Resolved - The completion date, also known as the satisfaction date of a public record item.

Date Opened - The date when a credit account was established.

Debt - The amount of money you owe.

Debit Card - A debit card is a card you can use to access your various bank or credit union accounts immediately. Using a debit card is similar to writing a check. You don’t incur any debt so long as sufficient funds are in your account, and no credit is extended to you.

Debt Consolidation Loan — A debt consolidation loan is a loan that combines several small debts with varying due dates and interest rates into a single, larger loan. Debt consolidation loans can be either secured or unsecured, meaning you may or may not need to have collateral to qualify for the loan.

Debt-to-Income Ratio - Your debt-to-income ratio compares your monthly debt payments to your monthly income and is a widely used measure of your creditworthiness. You can compute your debt-to-income ratio by dividing your monthly minimum debt payments (excluding rent or mortgage) by your monthly take-home pay.

Debt Settlement/Debt Negotiation/Debt Arbitration - An alternative process to bankruptcy that occurs when creditors agree to accept payment of less than the full balance owed to settle a past due debt in full.

Deed — This document shows that an owner of a piece of real property has title to that property. Once a deed is filed and recorded by your local government, the deed becomes a public record.

Default - A card issuer may consider a cardholder in default if the cardholder fails to perform all of the duties and obligations set forth in the cardholder agreement. Deferred Payment Payments either put off to a future date or extended over a longer period.

Deficit — If your monthly income is less than your monthly expenses, your spending plan will reflect a deficit. The only ways to resolve a deficit in your spending plan are to cut down on your expenses, increase your income or a combination of both.

Deflation — Deflation is a broad, overall drop in the price of goods and services; it is the opposite of inflation.

Delinquency - When payments are not being made, as the agreement requires. Delinquency classifications include: 30, 60, 90 and 120 days past due, Charge-off, repossession, collections etc.

Delinquency Assessment/late Fee - A fee that is charged for making a late payment.

Department of Housing and Urban Development (HUD) — HUD is a federal governmental entity responsible for the implementation and administration of housing and urban development programs.

Direct Deposit — Prearranged payments from a third party directly into a checking or savings account (e.g., paychecks, social security payments).

Discharge - Granted by the court to release the debtor from the debts after they were included in bankruptcy.

Disclosure - To provide the consumer with their credit history as required by FCRA.

Disclosure Statement - Details the actual cost of the loan, including interest and loan fees. For credit card accounts this can also be in the card member agreement.

Discount Point — A discount point is an amount of money a borrower pays to a lender, or seller pays to a lender, to increase the lender’s effective yield. One point is equal to 1% of the loan. What a discount point effectively does is pay the lender up front in exchange for a reduced interest rate.

Discretionary Income - The money you have left over when all expenses and other Financial obligations are paid.

Dismissed - When the judge decides that the consumer cannot continue with the bankruptcy, he will dismiss the application/case.

Disposable Income - Money left over after taxes are deducted.

Dispute - 1. If you think your bill (credit card statement) is wrong, you must write to your credit card issuer within 60 days from the date of the statement that the error first appeared in, to dispute the charge/information. The credit card issuer must acknowledge your letter within 30 days, and then must either correct the error or give an explanation why it thinks the statement is correct within 90 days after receipt of your letter (within 2 billing cycles). You do not need to pay the disputed amount when it is being investigated. 2. If you think an entry on your credit report is wrong, inaccurate or incomplete, you have the right to dispute the entry with the credit bureau. You must write the credit bureau with evidence of the disputed entry, keep a copy of the correspondence for your records and send the letter by certified mail. The credit bureau must respond to your letter within 30 days of receiving your letter.

Diversification — Diversification is the process of spreading assets among different investments to reduce the risk of a decline in value of an investor’s total portfolio from a decline in any one investment.

Dividend — A dividend is a payment to shareholders that a company’s board of directors approves from earnings.

Dollar Cost Averaging — Dollar cost averaging refers to investing regular sums of money (e.g., $50) at regular time intervals (e.g., quarterly), regardless of whether security prices are moving up or down.

Downpayment — A downpayment is a portion of the sales price you pay to the seller to close a sale, with the understanding that the balance will be paid at settlement. It is also the difference between the sale price of real estate and the mortgage amount.

Due Date - The day the payment is due to a creditor. After that date, the payment can be considered delinquent and incur a late fee/delinquency assessment.

Due-On-Sale — Due-on-sale is a clause in a mortgage contract that states that if the borrower sells, transfers or in any other way encumbers the property, then the lender has the right to implement an acceleration clause making the balance of the mortgage due. In other words, if you sell your home, you have to pay off the mortgage immediately, and then any money that’s left over you can use any way you choose.

E

Early-Stage Collections — If one or more of your credit accounts are between 1 and 59 days past due (delinquent), most creditors will regard these accounts as being in early-stage collection. (See also Collections.)

Earned Income — Earned income is payment received for work, such as wages, salaries, commissions and tips.

Earnest Money — Earnest money is a deposit you pay to the seller of real property to show your good faith and intentions of getting a mortgage to buy the property. Depending on circumstances, you may or may not be able to get this money back if you decide not to complete the purchase.

Electronic Funds Transfer (EFT) — If you have a checking account, you may also have some type of electronic or paperless access to your money. If you have your check deposited directly into your account, or if you use a personal computer or phone to conduct financial transactions, you are using EFT systems. These systems eliminate the hassle of check writing, are accessible in locations other than a bank and can be used at times other than traditional business hours. Forms of EFT include:

• An Automated Teller Machine (ATM) Card is a plastic card that allows you to use an ATM to authorize access directly to your financial institution account to withdraw or deposit money, transfer funds from one account to another or check your account balance. For security purposes, when you use your ATM card, you also use your personal password, called a personal identification number (PIN). The PIN verifies that the person using the card is authorized to do so. Some ATMs charge transaction fees. These charges should be called to your attention before you complete a transaction on any given machine so you can decide whether you wish to use the services for the fee you will be charged.
• A Debit Card frequently looks like a credit card and may even have a credit card company’s logo. It can be used like a credit card to make purchases, but the money is drawn electronically from your account right away. Transaction fees may also be charged for the use of these cards. You don’t incur any debt so long as sufficient funds are in your account, and no credit is extended to you.
• Smart Cards are issued by financial institutions and other organizations. The plastic card contains a microprocessing and memory chip that stores and manipulates data. It is “charged” with a specific amount of money that decreases each time a purchase is made. Many smart cards must be used with a personal identification number (PIN) to identify the user. Smart cards are used by phone companies for long-distance calls, by colleges for student meals and other purchases, by toll booths and by government programs, such as food stamps.

Equal Credit Opportunity Act (ECOA) - A federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status, or receipt of income from public assistance programs.

Effective Date - The first day your card is activated and ready for you to use, or when new terms become effective.

Employee Benefit — Benefits are things of value that an employee receives in addition to a wage or salary. Examples include health insurance, life insurance, discounted childcare and subsidized meals at the company cafeteria.

Employer-Sponsored Retirement Savings Program — Employers may offer tax-deferred savings plans that provide a federal tax deduction, tax-deferral of contributions and earnings and, in some cases, employer matching. They include 401(k) plans for corporate employees, 403(b) plans for employees of schools and nonprofit organizations and Section 457 plans for state and local government employees.

Employer-Sponsored Savings Plan — An employer-sponsored savings plan is a government-approved program through which an employer can assist workers in building their personal retirement funds.

Encumbrance — An encumbrance is anything that affects or limits the fee simple title to property, such as mortgages, leases, easements or restrictions.

Endorsement — An endorsement is a signature on the back of the check that entitles the payee to either receive or transfer payment.

Entrepreneur — An entrepreneur is a person who starts a business.

End-user - The business that receives the report for decision-making purposes that meet the permissible purpose requirements of the FCRA.

Equifax - One of the 3 national credit reporting bureaus: www.equifax.com, 800-685-1111, P.O. Box 740241, Atlanta, GA 30374-0241

Equity — Equity is net ownership. In other words, it’s the difference between how much your property is worth and how much you still owe on your mortgage and other liens (market value minus mortgage balance). Equity is also sometimes called owner’s interest.

Escrow — Escrow is a deposit made by a borrower to the lender to pay taxes and insurance premiums when they come due. Escrow is also a deposit made by a borrower to an attorney or escrow agent to be disbursed upon the closing of a sale of real estate. In some areas, escrow accounts are called impounds or reserves.

Expenditure — An expenditure is something you pay money for. Examples include food, gasoline, car payments and rent or mortgage payments.

Experian - One of the 3 national credit reporting bureaus: www.experian.com, 888-EXPERIAN (397-3742), P.O. Box 2002, Allen TX 75013

F

F (Fixed) - If the letter ""F"" appears after the annual percentage rate (APR) the interest rate is fixed and not subject to adjustment.

Fair Credit Billing Ac - A federal law, which ensures that you can find, and fix billing mistakes and errors.

Fair Credit Reporting Act (FCRA) - The FCRA protects consumers' privacy by defining permissible purposes a business or individual must have when requesting a credit report, providing consumers with the right to obtain copies of their credit reports for free if denied credit, defining obsolete information, and declaring that reasonable procedures must be used to ensure accuracy.

Fair Debt Collection Practices Act (FDCPA) - A federal law established in 1974, which ensures that you are protected from harassment, abusive and unfair treatment by debt collectors.

Fannie Mae — Fannie Mae is the nation’s largest mortgage investor. It is a private, stockholder-owned company. The U.S. President appoints some of the members of its board of directors. It supports the secondary residential mortgage market.

Federal Deposit Insurance Corporation (FDIC) — The FDIC is a federal agency, established in 1933, that protects deposits in financial institutions against certain losses of up to $100,000.

Federal Housing Administration (FHA) — The FHA is a federal agency in the Department of Housing and Urban Development (HUD) that provides mortgage insurance for residential mortgages and sets standards for construction and underwriting. The FHA dose not lend money or plan or construct housing.

Federal Insurance Contributions Act (FICA) — FICA is the legislation that funds social security. Your paycheck may show the amount taken out for social security as a deduction for FICA.

Federal Reserve - A central bank that monitors and influences the total supply of money and credit. The Federal Reserve Board sets interest rates, maintains the flow of cash to local and regional banks, clears checks, provides deposit insurance, and helps guarantee the stability and security of the U.S banking system.

FHA-Insured Loan — Home mortgage loans insured by the Federal Housing Administration (FHA) are referred to as “FHA loans” or “FHA-Insured Loans.” (See also Federal Housing Administration [FHA].

FICO Score - Credit scoring system where scores range between 350 and 850 points, and use the following criteria: payment history, amounts owed, length of credit Histoy, amount of recently aquired credit, and types of credit currently held

Finance Charge - A charge made for consumer credit including interest and certain fees.

Finance Company - A business that makes consumer loans, often to consumers who cannot qualify for credit at a bank They usually charge a interest rate.

Financial Health/Financial Well-Being - Describes your overall financial situation.

Financial Security/Stability — Financial security/stability is the comfortable feeling you have when your financial resources are adequate to fill your needs and most of your wants, and sufficient resources are available to handle emergencies.

First Mortgage — A first mortgage gives the lender a security right over all other mortgages on the mortgaged property.

Fixed Expenses - Expenses that you have to pay each week/month that do not vary, for example: rent, mortgage or auto payment

Fixed Rate - An interest rate that does not vary based on an index but is fixed at a previously disclosed level.

Floor — A floor is the minimum interest rate on an adjustable rate mortgage (ARM).

Forbearance - A method of postponing payments, for 6 to 12 months, due to financial hardship. This can be renewed annually up to a period of 3 years. Interest still accrues and is added to the loan balance at the end of the forbearance period.

Foreclosure - A legal process in which the mortgaged property is sold to pay the loan of the defaulting borrower.

Foreign Currency Surcharge - A foreign currency surcharge covers the cost of converting purchases made in a foreign currency to the cardholder's home currency.

Fraud/Credit Fraud/Identity Theft - Intentional perversion of truth in order to induce another to part with something of value or to surrender a legal right.

Freddie Mac — Freddie Mac is a stockholder-owned corporation that supports the secondary market in mortgages on residential property with mortgage purchase and securitization programs. The U.S. President appoints a portion of its board of directors. It is also known as the Federal Home Loan Mortgage Corporation (FHLMC).

Front-End Debt-to-Income Ratio — Your front-end debt-to-income ratio compares your monthly housing expenses to your monthly income and is a widely used measure of your creditworthiness. You compute your debt-to income ratio by dividing your monthly housing expenses—including your rent/mortgage, interest, insurance and property taxes—by your monthly gross income.

For Sale By Owner (FSBO) — FSBO is a term used to describe a home that is being sold by the owner, without assistance from a real estate agent or a broker. The seller is attempting to save money by avoiding agent’s and broker’s fees. Buyers should be careful to make sure the terms of sale comply with all applicable federal, state and local regulations.

401(k) Plan (Salary-Reduction Plan) - The term 401(k) comes from the IRS code section describing the program. It is designed for employees of private corporations who may contribute as much as 15% of their gross earnings each year, up to a maximum amount set by law. Some employers may select

403(b) Plan - A plan similar to a 401(k) but it?s offered by non-profit organizations, such as hospitals, colleges, and other charities. Withdrawing funds before a certain age will result in a penalty tax.

457 Plan - This is made available to employees of state and federal governments and agencies. With a 457 plan there are never employer matching contributions

G

Garnishment - A legal process through which a creditor has obtained judgment on a debt allowing it to receive full or partial payment by seizure of a portion of the debtor's assets (wages, bank account, etc.)

Gold Card - A gold credit card has a gold hue and may offer a larger line of credit than a standard card, and may also provide extra perks or incentives to cardholders.

Good Faith Estimate (GFE) — A GFE tells borrowers at or before closing the approximate closing costs they’ll have to pay, based on common local real estate practices. Under the Real Estate Settlement Procedures Act, your mortgage lender or mortgage broker must deliver the GFE to you within 3 days after accepting your mortgage loan application. (See also Closing Costs.)

Goods and Services Dispute - If you have a problem with the quality of service or property that you purchase with a charge or credit card, and you have tried to correct the problem with the merchant, you may have the right not to pay the remaining amount due. However, you MUST have made the purchase in your home sate or, if not within your home state then, within 100 miles of your current mailing address, and the purchase price MUST have been more than $50.

Government Transfer Payment — A government transfer payment is payment by a government, such as social security, veterans’ benefits or welfare, to people who do not supply current goods, services or labor in exchange for these payments.

Grace Period - The period of time that you have to pay your bill in full and avoid any interest charges. For example: if you pay off your balance in full September 1st and then buy an item on September 2nd, you will not be charged interest for the timer period between September 2nd and your next statement. Grace periods are usually 20 to 25 days. There are generally no grace periods for cash advances and if you are carrying a balance.

Graduated-Payment Mortgage — With a graduated-payment mortgage, payments increase for a specified period of time, then level off. This usually results in negative amortization.

Gross Income - Total income before taxes are deducted.

Guarantor - An individual who is financially liable for an account and does not have charging privileges.

H

Hazard Insurance — Hazard insurance provides compensation to the insured in case of property loss or damage.

High Balance - The highest amount that you have owed on the account to date.

Home Equity Line of Credit (HELOC) - A HELOC is a revolving loan that uses your home as collateral. You are given a credit limit and can borrow as much or as little as you want against the limit. This type of loan acts much like a checking account. Your lender provides you with checks, and you can draw on the account any time you like as long as you don’t exceed your credit limit.

Home Equity Loan — A home equity loan, also known as a second mortgage, is a closed-ended, secured loan that uses your home as collateral. It can have fixed or adjustable terms, interest rates and payments. You usually borrow a prearranged amount from your lender and pay it back in installments (often monthly).

Home Inspection — A home inspection is a close physical examination to evaluate a home’s plumbing, electrical and heating and cooling systems, as well as its appliances, roof, foundation and structural stability. The inspection should be completed before you purchase a home, and your contract offer should state that purchase would be contingent on the home inspection results.

Homeowners’ Association (HOA) — An HOA is a nonprofit corporation or association that manages the common areas and services of a planned unit development or condominium project. In a condominium project, the HOA has no ownership interest in the common areas; in a planned unit development, it holds title to common areas.

Homeowner’s Warranty (HOW) Program — The HOW program is an insurance program through which participating builders provide homebuyers with a warranty on the workmanship and materials of a home and warrant against major structural defects.

Household Income - Total income for the household, from wages, commissions, alimony, child support, bonuses, social security, retirement benefits, disability, dividends, interest, unemployment compensation etc.

I

Identity - The distinguishing character or personality of a consumer. Identity includes any unique information about a consumer such as a Social Security number.

Identity Confirmation - The successful verification of a consumer's identity.

Identity Theft — Identity theft is when someone gains access to and uses another person’s credit card numbers, social security number, birth date, checking or savings account numbers, drivers’ license, automobile records or other important personal information for their own gain. Identity theft is a crime.

Income — Income is earnings from work or investment. (See also Compensation, Gross Income, Net Income.

Index - An index is an objective, published figure (not controlled by the lender) used to establish a lending rate. Some common indexes are the London Interbank Offered Rate (LIBOR) and the Prime Rate as listed in the Wall Street Journal.

Indexed Rate - The indexed rate is determined by adding the margin to the published index.

Individual Retirement Account (IRA) - A tax-deferred retirement plan established by people who have wage, salary, or net self-employment earnings. IRA's are typically opened with banks, mutual funds, insurance companies, and stock brokerage firms. You can set up an IRA in one of two ways: (1) by making annual contributions, and (2) by rolling over a distribution received from a qualified employer plan or from another IRA, creating a rollover IRA. An IRA allows you to save up to $4,000 per year, with all the interest earnings tax-deferred until withdrawals begin at age 59 or older. You can also open an IRA account even if you are covered by another retirement plan. The amount that is tax deductible may vary according to your existing pension coverage, income tax filings status, and adjusted gross income.

Inflation — A broad, overall rise in the price of goods and services. Inflation is often expressed as an annual percentage. It is the opposite of deflation.

Inspection Certificate — An inspection certificate is a document that verifies that a property is as described. The inspection is usually performed by a designated agent and may be accepted in place of a survey. (See also Home Inspection.)

Installment Loan - A credit account in which the debt is divided into amounts to be paid successively at specified intervals set by the terms of the loan.

Installment Loan Account Number - A reference number assigned by the creditor to a specific installment loan account (for example: auto, student, furniture, jewelry).

Insurance — Insurance offers compensation for the loss of life, health, home, car or other valuables. Insurance is usually purchased in periodic payments, called premiums.

Interest — 1) Interest is the cost associated with borrowing or lending money. It is usually stated as an annual percentage. You either pay interest when you borrow money or you are paid interest when you save and invest money. 2) Interest is a right, share or title in property.

Interest Rate - The interest rate is the factor used to calculate the finance charge applied to your account, often expressed as an annualized rate.

Introductory (or Intro) Rate - A lender may charge an introductory or teaser rate, which is lower than their normal interest rate, for a short period of time (usually commencing when an account is established). After the introductory period is over, the rate charged increases to the stated post-introductory interest rate.

Inquiry - An examination of a consumer's credit history. A prospective lender checking with a credit bureau about your credit history.

Investing — Investing is the process of setting money aside to increase wealth over time and accumulate funds for long-term financial goals, such as retirement.

Investor — Investors are the people who buy (and sell) securities, such as stocks and bonds, to achieve financial goals.

Issuer — An issuer is a financial institution or organization that grants credit and may or may not administer those credit accounts. For example, Visa and MasterCard are issued by banks and other financial institutions, whereas Discover Card and American Express are self-issued.

J

Joint Credit - Credit is issued to two people based on an evaluation of each party's respective assets, incomes and credit history. Both parties are fully responsible for repaying the debt.

Judgment — A judgment is a decision issued by a court of law at the end of a lawsuit. If you are sued and lose, the lender (plaintiff) receives a judgment against you. An unsecured creditor must have a court judgment to garnish your wages or take away your property.

Jumbo Loan — A jumbo loan is a loan that exceeds the statutory size limit eligible for purchase or securitization by federal agencies.

L

Late Payment Fee - A customer is charged a late payment fee when their monthly payment is not received as of the due date for payment as shown on the billing statement.

Late-Stage Collections — If one or more of your credit accounts are more than 120 days past due (delinquent), most collectors will regard these accounts as being in late-stage collection. (See also Collections.)

Lease-Purchase — Lease-purchase is a method of purchasing property by making gradual payments in addition to the required rent for a set period. At the end of this period, the renter uses a mortgage loan to finance the purchase of the property.

Ledger — See Check Register.

Lender — A lender is a financial institution or agency that loans you money.

Liability — A liability is a financial obligation, debt, claim or potential loss.

Lien - An interest that a creditor has in a consumer's property that lasts until the satisfaction of some debt or duty.

Line of Credit - Credit limit established by a creditor.

Liquidity — The quality of an asset that permits it to be converted quickly into cash without loss of value. Savings accounts, for example, are liquid assets.

Loan Origination Fee — A loan origination fee is charged by lenders to prepare documents, make credit checks and inspect and sometimes appraise property. It is usually stated as a percentage of the face value of the loan.

Loan Servicing — Loan servicing, simply stated, is the management of a loan. It includes collection of loan payments, management of escrow accounts and disbursements from escrow accounts.

Loan-to-Value Ratio (LTV) — LTV is the ratio of the amount borrowed compared with the appraised value or sales price of real property. LTVs are expressed as percentages.

Lock-In Period — A lock-in period is the number of days during which a lender guarantees a borrower a specific interest rate and terms of a mortgage.

Long-Term Goal — A long-term goal is one you want to accomplish at least 5 years from now. An example of a long-term goal is saving enough money for a downpayment on a house.

Loss — The negative difference between total revenue from a business or investment minus total expense.

M

Manner of Payment (MOP) - A series of codes or statements used to show the payment habits (prompt, delinquent, etc.) of a consumer.

Manufactured Housing — Manufactured housing refers to factory-built or prefabricated housing, including mobile homes.

Market Value — The highest price that a buyer—ready, willing and able but not compelled to buy—would pay, and the lowest price a seller—ready, willing and able but not compelled to sell—would accept. Market value is the basis for the “listing price” or the “asking price” of a home.

MasterCard - MasterCard, a product of MasterCard International, is distributed by issuing financial institutions around the world. MasterCard's products are issued by 23,000 financial institutions in 220 countries and territories.

Medicaid — A U.S. program, jointly funded by states and the federal government and administered by the states, that reimburses hospitals and physicians for health care for qualifying low-income individuals.

Medicare — Medicare is a federal government program of transfer payments for certain health care expenses for citizens 65 or older. The Social Security Administration manages the program.

Mid-Stage Collections — If one or more of your credit accounts are between 60 and 119 days past due (delinquent), most collectors will regard these accounts as being in mid-stage collection. (See also Collections.)

Mid-Term Goal — A mid-term goal is one you want to accomplish in the next 1–5 years. This could include saving enough money for a downpayment on a car.

Minimum Payment Due - The minimum amount a cardholder can pay to keep the account from going into default. Most card issuers require a minimum payment of at least 2 percent of the outstanding balance.

Money Market Deposit Account - A type of savings account that pays a higher rate of return (interest rate) than a traditional savings account but often requires a minimum balance. In most cases funds can be withdrawn at any time

Money Market Mutual Fund — A money market mutual fund is an investment fund that relies on short-term securities. Some money market mutual funds allow you to write checks from the fund, with restrictions. These funds are not federally insured. (See also Money Market Deposit Account.

Money Wire (Transfer) — Transferring or wiring money is the process of moving money from one financial institution to another, sometimes between countries.

Monthly Periodic Rate - The monthly periodic rate, calculated monthly, equals the yearly rate divided by 12.

Mortgage - A document in which the owner pledges his/her/its title to real property to a creditor as security for a loan.

Mortgage Account Number - An account number created by a creditor that is usually found on either the monthly statement or coupon book issued with the loan.

Mortgage Banker — A mortgage banker can be an individual, firm or corporation that originates, sells or services loans secured by mortgages on real property.

Mortgage Broker — A mortgage broker can be a firm or individual who, for a commission, matches borrowers with lenders. A mortgage broker takes applications and sometimes processes loans but generally doesn’t use its own funds for closing.

Mortgagee — The mortgagee is the loan lender.

Mortgagor — The mortgagor is the loan borrower who pledges property as a security for a debt.

Multiple Listing Service (MLS) — A service provided by the Board of Realtors® that provides access to real estate listings of properties for sale or lease.

Mortgage Debts - Includes first mortgages, home equity loans, and any other loans secured by your real estate, including second homes and investment property.

Mortgage Fraud - The intentional material misstatement, misrepresentation, enticement or omission relied upon by an Enterprise to fund or purchase - or not to fund or purchase – a mortgage, mortgage backed security, or similar financial instrument. The term includes, but is not limited to, identification and employment documents, mortgagee or mortgagor identity, and appraisals that are fraudulent.

Mutual Fund - An open-end investment company that combines the funds of investors who have purchased shares of ownership in the investment company and then invests that money in a diversified portfolio of securities issued by other corporations and governments. You don?t own the individual stock or bond but you have a share of the mutual fund itself.

N

National Credit Union Administration (NCUA) — The NCUA is a federal agency that charters and oversees federal credit unions. The NCUA insures deposits at federal credit unions and at some state credit unions against certain losses.

Needs — In financial terms, needs are those economic goods and services that are considered basic, such as food, clothing and shelter. (See also Wants.)

Net Income — Your net income is your after-tax pay. It is the money you receive after all tax withholdings, including social security, have been subtracted from your gross income. (See also Disposable Income, Gross Income.)

New Balance - The new balance is the outstanding amount calculated as of the statement closing date, also known as total new balance.

O

Offline Debit Card - An offline credit card shares traits of both ATM and credit cards. Offline debit cards have the VISA or MasterCard logo on them and can be issued by a bank, instead of, or in addition to, an ATM card. They can be used at any establishment that displays the VISA or MasterCard logo, but using them does not access a line of credit. Instead it debits a customer's checking account, but there's a delay of 24 to 72 hours before the debit is made in the account.

Online Bank (Internet Bank, Web Bank) — An online bank is a financial institution that exists online but may not have a physical location where you deposit or withdraw money. It may have a relationship with a bricks-and-mortar financial institution. It may require electronic funds transfer (EFT) to deposit or withdraw money.

Online Banking (Internet Banking, Web Banking) — Online banking refers to the range of financial transactions you can perform online through your financial institution’s website. Online banking often includes electronic bill payment and allows you to check your accounts and transfer funds at your convenience, among other things.

Open Account - An account that is active, still in use, or still being paid.

Open-Ended Credit (Non-Installment or Revolving Credit) — Open-ended credit is a preapproved loan of a specified amount of money for an unlimited period of time. Most credit cards are considered open-ended loans. You can use as little or as much of your credit line whenever you want. However, if you reach your credit limit, you must pay off some of your balance before you can charge any more to the account. A home equity line of credit is an example of open-ended credit. (See also Credit Limit/Credit Line.)

Opportunity Cost — The opportunity cost of a choice is the value of the best alternative given up.

Opt-Out - Limiting the sharing of information about you to others, such as opting out of credit or insurance offers that were not initiated by you.

Overdraft — Overdraft refers to a lack of sufficient funds to cover the full amount of a check.

Overdraft Protection — Overdraft protection is provided by a financial institution, with the permission of the account holder, and allows the institution to transfer funds from a savings or credit account to a checking account to cover insufficient funds.

Over-the-Limit Fee — Your credit grantor may charge you an over-the-limit fee if you exceed your credit limit. The fees range from $10 to $30.

P

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

Payday Loan — A payday loan is a short-term loan that carries a high fee and uses a borrower’s anticipated paycheck as collateral. Payday loans are generally made for 2-week periods and may be rolled over (renewed) for additional fees. Lenders typically charge $7.50–$10 for each $100 of the loan. These fees, when calculated on an annual basis, can equal annual percentage rates (APRs) of 300% to 700%, making payday loans an extremely expensive form of credit.

Payroll Deduction — A payroll deduction is an amount subtracted from a paycheck as the government requires or the employee requests. Mandatory deductions include various taxes. Voluntary deductions include loan payments or deposits into saving accounts.

Penalty Rate - A penalty rate, an increase in a card's annual percentage rate, may go into effect in the event an account holder defaults on a payment or other obligation.

Periodic Rate - The periodic rate is determined by dividing the APR by a unit of time (e.g. monthly periodic rate or daily periodic rate).

Permissible Purpose - The particular circumstances under which a consumer credit report may be disclosed by a credit bureau in accordance with the Fair Credit Reporting Act.

Personal Identification Number (PIN) - A Personal Identification Number is a security measure that requires a number entry into an electronic keypad before a transaction may be completed. This number is usually designated by the consumer at the time an account is opened.

Personal Line of Credit - The maximum amount one can owe at any time, based on income, debt and credit history.

PITI — “PITI” stands for principal, interest, taxes and insurance. Most monthly residential mortgage payments include all four of these items.

Platinum Card - A platinum credit card has a platinum hue and may offer a larger line of credit (generally $5,000 and up) than a standard or a gold card, and may also provide extra perks or incentives to cardholders.

Point — A point is 1% of the dollar amount of the mortgage loan. For example, if your loan amount is $150,000, one point is $1,500. By paying points, you can generally lower the loan’s interest rate; however, not all lenders allow this. Points may be paid by the buyer or the seller or split between them.

Point of Sale (POS) - The point of sale is the location where the transaction takes place. Posting Date The posting date is the date that a credit or charge is recorded on your account.

Pre-Approved - A credit card with a pre-approved offer means that a potential customer has passed a preliminary credit screening.

Predatory Lending - Any of a number of fraudulent, deceptive, discriminatory, or unfavorable lending practices likely to harm borrowers. Many of these practices are illegal, while others are legal but not in the best interest of the borrowers.

Prepaid Item — Prepaid items are costs paid at closing for taxes, interest and insurance. Because prepaid items are recurring costs that don’t relate to the acquisition of the property itself, they can’t be financed.

Prepayment Penalty — A prepayment penalty is a fee that may be charged if you repay all or part of your mortgage loan before the due date. FHA-insured loans and some loans made by state-chartered financial institutions do not allow prepayment penalties.

Prequalification — Prequalification is an evaluation of a potential borrower’s financial status to determine the size and type of mortgage available to him/her.

Previous Balance - The previous balance is the outstanding balance on the account at the end of the previous billing cycle.

Primary Cardholder - The primary cardholder is the person listed on an account who shares financial responsibility with the secondary cardholder.

Prime Rate - The prime rate is an index used to calculate the applicable APR for a variable rate account.

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

Private Label Cards - A private label card is issued by a retail outlet such as a department store or gasoline company, that contains the logo of the private company. It is generally accepted only by the retailer who issued it.

Private Mortgage Insurance (PMI) — PMI is insurance underwritten by a private company protecting the mortgage lender against financial loss if a borrower were to default on his or her mortgage.

Profit — The positive difference between total revenue from a business or investment, minus total expenses.

Promotional Inquiry - An inquiry made into a consumer's credit report for purposes of a promotional offer.

Property Tax — Property tax is the money you pay to your local and state government when you own property within their jurisdiction. The tax is usually based on the value of the property (including the land).

Prospectus — A prospectus is an official document that contains information that describes a mutual fund. It is required by the Securities & Exchange Commission.

Public Record - Information that is available to the general public including tax liens, court judgments, and bankruptcy proceedings.

Purchasing Power — Purchasing power is a measurement of the relative value of money in terms of the quality and quantity of goods and services it can buy. Inflation decreases purchasing power; deflation increases it.

Q

Qualifying Ratio — Qualifying ratios are calculations that are used in determining whether a borrower can qualify for a mortgage. They consist of two separate calculations: 1) a housing expense as a percent of income ratio and 2) total debt obligations as a percent of income ratio.

R

Rate of Return — The rate of return, also called the yield, is the return on an investment expressed as a percentage of its cost. For example, a $3 annual return divided by a cost of $24 per share = .125 or a 12.5% rate of return.

Real Estate Settlement Procedures Act (RESPA) — RESPA is a federal law that requires disclosure of all known or estimated settlement costs a homebuyer will have to pay. You should receive this information after you apply for a loan and again when you go to settlement.

Real Property — Real property is land and objects permanently attached to it, such as buildings and fences. In some states, this term is synonymous with the term “real estate.”

Rebate Credit Card - A rebate credit card allows the customer to accumulate cash, merchandise or services based on card usage.

Recent Activity - Recent activity refers to the transactions posted to your account for the current billing cycle, and since the last statement.

Refinancing — Refinancing is defined as repaying a debt with the proceeds of a new loan, using the same property as collateral. For example, you pay off your original mortgage with a new one. Most of the time, people refinance to take advantage of a lower interest rate to lower their monthly payments.

Rent — Rent is a periodic fee for the use of property.

Repossession - The act of a creditor regaining possession of an item sold to you.

Revolver - A revolver is a term credit card issuers use for cardholders who roll over part of the account balance to the next month instead of paying off the balance in full each month.

Retail Card - A credit card issued by a retail store.

Revolving Line of Credit - A revolving line of credit is an agreement to lend a specific amount to a borrower and to allow that amount to be borrowed again once it is repaid. Most credit cards are considered revolving lines of credit.

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

Risk — Risk is exposure to loss of investment capital from a variety of causes, such as business failure, stock market volatility and interest rate changes. In business, risk is the likelihood of loss or reduced profit.

Risk Management — Risk management refers to procedures to minimize the adverse effect of a possible financial loss by 1) identifying potential sources of loss, 2) measuring the financial consequences of a loss occurring and 3) using controls to minimize actual losses or their financial consequences.

Rule of 72 — The Rule of 72 is a quick way to calculate how long it will take to double a sum of money. Divide 72 by the expected interest rate to determine the number of years. For example, say you put money in an account that earns 8% interest. 72 divided by 8 equals 9. The amount of money you put in will double in 9 years.

Rural Housing Service (RHS) Loan — An RHS loan is a home mortgage loan that is guaranteed by the Rural Housing Service.

S

Salary — Salary is payment for work, usually calculated in periods of a week or longer. Salary is usually tied to the completion of specific duties over a minimum but not maximum number of hours. (See also Wage.)

Saving — Saving is the process of setting aside money until a future date instead of spending it today. The goal of saving is to provide funds for emergencies, short-term goals and investments.

Savings Account - A deposit account that pays a low rate of interest, but funds can be withdrawn at any time without penalty or obligation.

Savings Bond — A savings bond is a certificate representing a debt. A U.S. Savings Bond is a loan to the U.S. government. The government agrees to repay the amount borrowed, with interest, to the bondholder. Savings bonds are often purchased through payroll deduction or at financial institutions in denominations of $50 to $10,000.

Savings & Loan Association (S&L) — S&Ls are financial institutions that provide loans and interest-bearing accounts. Accounts in federally chartered S&Ls are federally insured.

Second Mortgage — A second mortgage is a mortgage that has rights subordinate to a first mortgage. A home equity loan is an example of a second mortgage.

Secondary User - A secondary user jointly applies for a credit card and has financial responsibility for the repayment of the account balance.

Secured Credit Card - A credit card guaranteed by a card holder with a security deposit to ensure payment of the outstanding balance if the card holder defaults on payments. It is generally used by people new to credit or people trying to rebuild a poor credit rating.

Secure Sockets Layer (SSL) - An Internet security standard used to establish a secure connection on the World Wide Web.

Secured Debt — A secured debt is one that is tied to a specific piece of property, such as a house. The property, called collateral, guarantees repayment of the debt. If you don’t pay, the creditor can take the property back (see Foreclosure, Repossession).

Seller’s Agent — An agent who acts on behalf of the seller of real property.

Short-Term Goal — A short-term goal is one that you want to achieve within 1 year. This could include saving enough money to buy new furniture or some similar purchase.

Simple Interest — Simple interest is interest credited daily, monthly, quarterly, semiannually or annually and calculated on the basis of principal only, not previously credited interest.

Site-Built Housing — Site-built housing refers to homes built on the construction site (as opposed to manufactured housing). Although some of the house may be prefabricated off-site, the house is assembled on-site.

Smart Card — Smart cards are plastic cards that contain a microprocessing and memory chip that stores and manipulates data. They are “charged” with a specific amount of money that decreases each time a purchase is made. They are issued by financial institutions and other organizations. Many smart cards must be used with a personal identification number (PIN) to identify the user. Smart cards are used, for example, by phone companies for long-distance calls, by colleges for student meals and other purchases, by toll booths and by government programs, such as food stamps.

Social Security - The Social Security program comprises an amalgam of 55 government programs for the elderly and others who qualify for benefits. Social Security focuses on providing Americans with minimum ? but not necessarily adequate ? protection against the loss of income from retirement, disability, or death of a family wage earner. Social Security is considered an unfunded pension plan run by the federal government because taxes collected from current workers pay the benefits for current retirees. Social Security benefits constitute one of the most important assets in the life of a wage earner.

Spending Plan — See Budget.

Standard Card - A standard card is the basic card offered by issuers. Customers with higher incomes and good credit reports can qualify for the higher-limit gold and platinum cards.

Statement — A statement is a monthly record of all activity within an account, provided by the financial institution.

Stock - Shares of ownership in the assets and earnings of a business corporation. Common stock is the most basic form of ownership of a corporation. The owner of a stock is called a stockholder or a shareholder and has a claim on the assets and earnings of the firm. Stocks may pay a dividend when the company is profitable, and/or may increase in value (appreciate) on the stock market. There is risk involved when purchasing stocks because they can easily lose value (depreciate). Stock values can fluctuate daily as they are traded on various stock exchanges around the world.

Supplemental Security Income (SSI) — Federal program that makes payments to low-income people 65 or older who are blind or have a disability.

Surplus — A surplus is the amount of money you have left over after paying all of your monthly bills. If your monthly income is more than your monthly expenses, you have a surplus.

T

T (Tiered) - If the letter T appears after the annual percentage rate (APR), the interest rate is based on tiered pricing, with different periodic rates applied to different levels of the outstanding balance.

Take-Home Pay — Take-home pay is your total wages or salary, plus bonuses, minus all payroll deductions.

Tax — A tax is a government fee on business or individual income, activities or products.

Tax Credit — A tax credit is an amount that a taxpayer who meets certain criteria can subtract from tax owed. Examples include a credit for earned income below a certain limit and for qualified postsecondary school expenses. (See also Tax Deduction, Tax Exemption.)

Tax Deduction — A tax deduction is an expense that a taxpayer can subtract from taxable income. Examples include deductions for home mortgage interest and for charitable gifts. (See also Tax Credit, Tax Exemption.)

Tax Deferral — Tax-deferred investments are those for which taxes on the amount invested or the earnings are not due until the funds are withdrawn, usually when the investor retires.

Tax-Exempt (Tax-Free) — Tax-exempt investments (e.g., municipal bonds) are those for which earnings are not taxed.

Tax Exemption — A tax exemption is an amount that a taxpayer who meets certain criteria can subtract from taxable income. Examples include exemptions for each dependent or for life insurance proceeds. (See also Tax Credit, Tax Deduction.)

Tax Lien - A charge upon real or personal property for the satisfaction of debts related to taxes.

Taxable Income — Taxable income is the amount of income subject to tax. In other words, it is total income after adjustments are made for deductions, exemptions and credits.

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

Time Value of Money — The time value of money is a method of comparing a lump sum of money, or a series of equal payments, between two different time periods (e.g., present and future), assuming a specified interest rate and time period.

Tip — A tip is an amount paid beyond what’s required, usually to express satisfaction with service quality. It is also known as a gratuity.

Titanium Card - A titanium credit card has a titanium hue and carries an even higher credit limit range and benefits than a platinum card.

Title — A title is written evidence of the right to or ownership in property. In real estate, the documentary evidence of ownership is the title deed that specifies in whom the legal estate is vested and the history of ownership and transfers. Title may be acquired through purchase, inheritance, devise, gift or through foreclosure of a mortgage.

Title Insurance Policy — A title insurance policy compensates the insured for any loss caused by defects of title to real estate in which the insured has an interest. Homebuyers usually must purchase lender’s title insurance to protect the lender’s interest and should choose to purchase buyer’s title insurance to protect their own interest.

Title Loan — A title loan is a short-term, high-interest-rate (200–300%) loans. To obtain a title loan, you must sign over the title to your vehicle.

Tradeline - Any credit account such as a bank loan, credit card, or mortgage.

Transaction Date - The transaction date is the date goods or services were purchased or the date a cash advance was made.

Transfer — See Money Wire.

Travelers’ Check — Travelers’ checks are documents that function as cash but can be replaced if lost or stolen. Travelers’ checks are often used when traveling to other countries.

Trust — Trust is a fiduciary relationship whereby legal title to a property is transferred to a trustee with the intention that such property be administered by the trustee for the benefit of another, the beneficiary, who holds equitable title to such property.

Truth in Lending Act - The Truth in Lending Act is a federal law requiring lenders to provide standardized information so borrowers can compare loan terms. In general, lenders must provide information on how much the credit will cost once repaid, when charges will be imposed and what the borrower's rights are as a consumer.

U

Unearned Income — Unearned income is money received for which no exchange was made, such as a gift.

Underwriting — Mortgage underwriting is the analysis of the risk involved in making a mortgage loan to determine whether the risk is acceptable to the lender. Underwriting involves the evaluation of the property as outlined in the appraisal report and the borrower’s ability and willingness to repay the loan.

Unsecured Debt — An unsecured debt is one that isn’t tied to a specific piece of property. If you don’t pay your unsecured debts, there is no property the creditor can immediately take away from you. The creditor must sue you in court and obtain a judgment against you to collect money owed. With a judgment, however, a creditor can garnish your wages or put a lien on your property.

Upfront Cost — Upfront costs are fees and other costs that a buyer must pay before closing on a home. These fees can include an appraisal fee, credit report fee, hazard insurance, flood insurance and other inspection fees.

U.S. Government Savings Bonds - Bonds that are backed with the full faith and credit of the U.S. government. Series EE savings bonds, which represent the most widely held security in the United States, are often purchased through employer payroll deduction plans. If the bonds are ever lost, stolen, or destroyed, they can be replaced. Series EE bonds are sold at different face amounts between $25 and $10,000, and may be redeemed only at maturity. Series HH bonds are sold in ranges from $500 to $10,000 and pay interest every six months, and may redeemed after six months.

V

V (variable) - If the letter V appears after the annual percentage rate (APR), the interest rate is variable and subject to change.

Variable Expense — A variable expense is one that can change from month to month and over which you have some control. Examples of variable expenses are restaurant meals and entertainment expenses. (See also Fixed Expense.)

Variable Interest Rate — A variable interest rate is one that is adjusted, usually quarterly, based on an economic indicator. They are commonly based on an economic index such as the prime interest rate, Treasury Bill rate or the Federal Funds rate.

Variable Rate - A variable rate is an interest rate that varies based on the combination of a published index rate and a previously disclosed margin.

Vantage Score - Credit scoring method which ranges between 500 and 999 points, and uses the following criteria to compute: Payment history, percentage of total credit used, amount of money you owe, a combination of the types of credit you have and how long you have had them, newly aquiored credit, and total available credit.

Veterans Affairs (VA) Loan — A VA loan is a mortgage loan made by an approved lender and guaranteed by the Department of Veterans Affairs. VA loans are made to eligible veterans and those currently serving in the military and can have a lower downpayment requirement than other types of loans.

VISA - VISA cards, a product of VISA USA, are distributed by financial institutions around the world. Nearly 600 million cards carry one of the Visa brands and more than 14 million locations worldwide accept Visa cards.

W

Wage — A wage is payment for work, usually as calculated in hours rather than weeks or months. (See also Salary.)

Wage Garnishment — See Garnishment.

Wants — In financial terms, wants are desired economic goods or services that go beyond basic needs. Wants are not necessarily accompanied by the power to satisfy them. (See also Needs.)

Wealth — Wealth is accumulated assets, such as money or possessions, often as a result of saving and investing.

Will — A will is a written legal document that tells people what to do with your property and other assets and who will care for your children under age 18 when you die.

Wire Transfer - A wire transfer moves funds electronically from one financial institution to another.