See Collection Agency
Used to determining creditworthiness and ability to return a loan. Capacity is assessed by weighing a borrower’s earning ability and the likelihood of continuing income against the amount of debt the borrower carries. While capacity may be considered in a credit decision, the credit report does not contain information about current or future earning ability.
See Consumer Credit Counseling Service
Chapter 7 Bankruptcy
Chapter 7 is the most common form of bankruptcy. It involves the appointment of a trustee who collects all non-exempt property of the debtor, sells it and distributes the proceeds between creditors. The individual is allowed to keep certain exempt property whose value varies between states. Most liens such as real estate mortgages or security interests for car loans survive.
Chapter 11 Bankruptcy
Chapter 11 usually results in reorganization of the debtor’s business or personal assets and debts. Debtors may “emerge” from a chapter 11 bankruptcy within a few months or within several years, depending on the size and complexity of the bankruptcy.
Chapter 12 Bankruptcy
Cases under Chapter 12 are administered like Chapter 11 cases, but with special protections to meet the special conditions of family farm operations.
Chapter 13 Bankruptcy
Cases under Chapter 13 are ones in which debtors repay their debts according to a plan accepted by the debtor, the creditors and the court. Plan payments usually come from the debtor’s future income and are paid to creditors through the court system and the bankruptcy trustee.
A charge-off is a debt that has been determined uncollectible by the original creditor (for internal accounting purposes only), usually after the debtor has become seriously delinquent. Typically charge-offs occur after six months of non-payment. Creditors can still collect on charge-offs because the debt is still valid. Charge-offs remain on your credit report for 7-1/2 years from the date first reported, and impact your score severely. (See Charge-Offs for more information).
Common Misspellings: chargeoff, charge off
Any court action against a consumer to regain owed money. It can be a wage assignment, child support judgment, small claims judgment or a civil judgment.
See Credit Karma.
The amount awarded in a court action.
Credit Limit Decrease.
Credit Limit Increase.
An account status, indicating that the account is no longer active, and the consumer is no longer able to make deposits/withdrawals to/out of the account.
The date an account was closed.
A person who is the guarantor of a contract, and is legally responsible to repay the charges in the joint account agreement. A co-signer is also known as a surety.
Common Misspellings: cosigner
The act of co-signing involves a promise to pay another person’s debt should that person fails to do so. A co-signer is legally responsible to repay the charges in the joint account agreement. Co-signing may be required in situations where an applicant’s credit worthiness is marginal. The co-signer is usually more creditworthy than the applicant.
A debt collection agency is a business that collects unpaid debts for other businesses. A company you do business with might charge-off your account and then sell your debt to a collection agency after you fail to pay your bill for a few months. Debts are usually sold for cents on the dollar. Alternatively, a collection agency may be hired to collect a debt for certain percentage of it.
Debt collection agencies use different methods to get you to pay: They may call you at home and work, send letters to your home, list the debt on your credit report or file a lawsuit against you.
A debt previously owned by a company you do business with that was sold to a collection agency. Debts like this often show up twice (or more) on your credit report. The original debt will appear as charged-off with $0 balance, and a new account with the original balance will appear under the collection agency’s name. Your unpaid debt may be sold many times, each time triggering a new account on your report.
Consumer Credit Counseling Service (CCCS)
An organization (usually a non-profit) who’s sole purpose is to help consumers repay their debts through careful budgeting and money management. In addition to helping consumers manage money, consumer credit counseling services have the power to request that creditors accept a specific repayment plan, such as a longer pay-off period.
See also National Foundation for Credit Counseling (NFCC) and Money Management International
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, Public Records and more (a.k.a. Credit Report).
A legal term for giving you’re your credit report. When your credit report is given directly to you, it is called a consumer disclosure because it discloses the contents of your credit file to you, the consumer.
Consumer Reporting Agency (CRA)
A company that gathers and records personal credit histories and sell it to creditors and lenders for legitimate business purposes. There are many types of consumer reporting agencies that collect and sell information such as Credit Histories, Rent Histories, Check Writing Histories, Rental Histories, Medical Histories and more.
There are three major credit bureaus that gather and record personal credit histories: Equifax, Experian (formerly TRW), and TransUnion.
Consumer Reporting Agencies are subject to the Fair Credit Reporting Act (FCRA).
Offers an explanation about a particular trade or public record item on your report, and it displays with that item on the credit report. See ../how-to-dispute-credit-report/ for more information.
See Consumer Reporting Agency
Credit is your right to defer payment or debt. Essentially, it’s a promise to pay in the future in order to borrow in the present.
A specific type of Consumer Reporting Agency (CRA) that gathers, records and sells personal Consumer Credit Information to creditors and lenders for legitimate business purposes.
There are 3 major credit bureaus: Equifax, Experian (formerly TRW), and TransUnion.
See Credit Report
Credit Fraud Alert
See Fraud Alert
When you put a credit freeze with the credit bureaus, they are not allowed to disclose your credit reports and scores to new lenders, creditors or any other entity that requests your information from them. See ../credit-freeze/ for more information.
Common Synonyms: Credit Lock, Security Lock, Security Freeze.
A company or an individual who lends money or property and therefore accepts risk.
A record of how a consumer uses credit over time, including payment history, account standing and dates of opening/closing accounts.
Information reported by current or past creditors, and appears on a person’s credit report.
A San Francisco company that provides free credit scores, free credit monitoring and various services to consumers. See ../credit-karma/ for more information.
The maximum amount a borrower can draw upon for credit or the maximum amount an account can show as outstanding.
See Credit Freeze
An agreement by which a person is legally bound to pay back borrowed money or used credit.
A person or business that loans money to someone else. The opposite of a debtor.
A practice that can be used by close family member to benefit from each other’s credit account to improve their own credit score. See ../credit-piggybacking/ for more information.
A system for judging someone’s ability to repay debts, based on history of payment of past debts, as well as current and projected income. Sometimes expressed as a number called Credit Score.
A document containing a complete and confidential summary of a person’s credit history including existing debts and payment history. It contains the payment history of mortgages, auto loans, credit cards and personal & student loans. It also includes current balances on outstanding debts, the individual’s amount of available credit, public records such as bankruptcies and inquiries about credit from various companies and any type of unpaid debt that went to collection agencies.
A measure of someone’s credit worthiness. People who are more likely to repay their debts on time are considered a better risk by lenders, and will get better terms (lower interest rate) when borrowing money. Credit risk is often expressed by credit scores.
A computer generated number, based on the information contained in a person’s credit report that expresses that person’s credit worthiness. The most commonly used credit score is FICO, which runs on a scale of 300-850 with the majority of people in the 600 to 800 range.
Credit Scoring System/Credit Scoring Model
A statistical system that determines your credit score by assigning numerical scores to various credit-related characteristics. The most commonly used credit scoring system is FICO.
Credit Utilization/Credit Utilization Ratio
A creditor’s measure of someone’s ability to pay back future debts. A consumer who receives favorable consideration and approval for credit from an establishment to which he or she applied is considered creditworthy.