A Glossary of Credit Report Terms and Definitions – Your Financial Picture
So you’ve got your credit report and you don’t know quite what to make of it. What does this mean? What does that mean? All these terms fired at you, assuming you know the definitions. And the result is that you end up thinking that perhaps they’re trying to fool you. But are they? Probably not. They’re just trying to explain the situation to you in their language – which isn’t necessarily your language.
So what we’re going to do here is translate their language into your language. Then you’ll have a good understanding of exactly what your credit report says about you. So pay close attention to the glossary of credit report terms and definitions below, and you’ll be on the same level as the credit reporting bureaus. And then you’ll understand what they’re saying to you.
- Account in Good Standing
An account in good standing has a positive status and should reflect favorably on your creditworthiness.
- Beacon Score
Your Beacon Score is the credit score that creditors look at when determining if you are credit-worthy. It’s determined by negative entries for late payments, and positive entries for payments on time. Note that every time you apply for credit, it becomes a negative entry.
Capacity is a factor in determining creditworthiness. It’s determined by weighing your earning ability and the likelihood of continuing income against the amount of debt you carry at the time of the credit application. Capacity may be considered in a credit decision, but the credit report doesn’t contain information about earning ability or the likelihood of continuing income.
- Collection Account
A collection account refers to the status of an account owed to a creditor when it’s been transferred from a routine debt to a Collection Department of the creditor’s firm or to a separate professional debt collecting firm.
- Consolidation Loan
A consolidation loan is usually obtained for the purpose of reducing the amount of the payments of bills owing by consolidating the debt into one loan payment. In effect, you pay off several bills with the proceeds from one loan, leaving you with one consolidated monthly payment.
- Consumer Credit Counseling Service
Consumer credit counseling services are organizations which help you to find a way to repay debts through careful budgeting and management of funds. They’re usually non-profit organizations, funded by creditors. These counseling services have the power to request that creditors accept a longer pay-off period, or other successful repayment plan.
Credit refers to your right to defer payment or debt, or in other words, your promise to pay in the future in order to buy or borrow in the present.
Your creditworthiness refers to a creditor’s measure of your past and future ability and willingness to repay debts.
- Credit History
Your credit history is a record of how you’ve borrowed and repaid debts.
- Credit Report
Your credit report is a record or file given to a prospective lender or employer showing your credit standing. It’s used to help determine your creditworthiness.
- Credit Reporting Agency (CRA)
A CRA is a company which gathers, files and sells information to creditors and/or employers, to facilitate their decisions to extend you credit or to hire you. The three major CRAs are Experian, Equifax and Trans Union.
- Credit Scoring System
The credit scoring system is a statistical system which determines whether or not to grant credit by assigning numerical scores to various characteristics related to creditworthiness.
- Date of Status
The date of status, on your credit report, is the date the creditor last reported information about your account.
You’re in default when you fail to meet the terms of a credit agreement.
Delinquent accounts are classified into categories according to the time past due. Common classifications are 30, 60, 90 and 120 days past due.
Disclosure refers to the process of providing you with your credit history as required by the FCRA.
If you believe an item of information on your credit report is inaccurate or incomplete, you may challenge, or dispute the item.
An end-user is a business that receives your credit report for decision-making purposes that meet the permissible purpose requirements of the FCRA.
- Equal Credit Opportunity Act (ECOA)
The ECOA is a U.S. federal law which prohibits creditors from discriminating against credit applicants on the basis of sex, marital status, race, color, religion, age, and/or receipt of public assistance.
- Fair Credit Reporting Act (FCRA)
The FCRA is the U.S. federal legislation that governs the actions of CRAs.
- Fair Debt Collection Practices Act (FDCPA)
The FDCPA is U.S. federal legislation that prohibits abusive and unfair debt collection practices.
Garnishment is a legal process where a creditor has obtained judgment on a debt and may subsequently obtain full or partial payment by seizure of a portion of a debtor’s assets (wages, bank account, etc.).
Investigation refers to the process a CRA goes through to verify credit report information you dispute. The CRA contacts the credit grantor who supplied the information and asks them to review the information and report back.
A judgment is an official court decision of an action or suit. This public record may be listed on your credit report in matters of money and debts owed.
Your liability, or liability amount, is your legal responsibility to repay debt.
A lien is a notice a creditor attaches to your property that tells the world that you owe the creditor money. You can’t sell that property without paying off the creditor.
- Notice of Results
If an investigation of your credit report results in information being updated or deleted, you may request a notice of results be sent to eligible credit grantors and employers who reviewed your information within a specific period of time.
Obsolescence refers to how long negative information should stay in a credit file before it’s not relevant to the credit granting decision. The FCRA has determined it to be 7 years except in the case of bankruptcy, where it’s 10 years.
- Opt In
You can opt in to prescreened credit and insurance offer lists, direct marketing lists and individual reference service lists. Your name is automatically put on those lists by the CRAs and you can opt in if you change your mind after you’ve opted out.
- Opt Out
When you opt out, CRAs, direct marketers and list compilers must remove your name from all future lists.
- Payment Status
Your payment status reflects the previous history of your account, including any delinquencies or derogatory conditions occurring during the previous 7 years.
- Permissible Purposes
Permissible purposes refers to the only reasons you may request a credit report, including credit transactions, employment purposes, insurance underwriting, government financial responsibility laws, court orders, subpoenas, legitimate business needs, etc.
- Personal Information
Your personal information is the information on your personal credit report associated with the records that have been reported to a CRA by you, your creditors and other sources. It may include name variations, your driver’s licence number, your Social Security (Insurance) number, your birth date, your spouse’s name, your employers, your telephone numbers and information about your residence.
- Public Record
A public record is any and all information obtained by the CRA from court records, such as liens, bankruptcy filings and judgments. They’re open to any person who requests to see them.
When you reschedule, you revise the timetable for loan repayments, and are usually granted longer repayment periods and often, new loans to pay the old ones.
- Risk Scoring Models
Risk scoring models are a numerical determination of your creditworthiness.
The source refers to a business or organization that supplied certain information that appears on your credit report.
- Third-Party Collectors
Third-party collectors, or collection agencies, are under contract to collect debts for a credit department or company.
A tradeline is an entry by a credit grantor to your credit history. It describes your account status and activity, including names of companies where you have accounts, dates accounts were opened, credit limits, types of account, balances owed and payment histories.
Verification is the process of verifying whether data in your credit report is correct or not. It’s initiated when you question some information in your file. CRAs will accept authentic documentation you submit that will help in the verification.
- Victim Statement
A victim statement is added to your credit report to alert credit grantors that your identification has been used fraudulently to obtain credit. The statement requests the credit grantor to contact you by telephone before issuing credit, and remains on file for 7 years unless you request it be removed.
- Wage Assignment
A wage assignment is a signed agreement by a buyer or borrower, permitting a creditor to collect a certain portion of your wages from your employer in the event of default.
So there you have it. Short and simple. And now you know your rights, you can comfortably paint your credit picture, knowing that all the colors will blend to give you a financial masterpiece!
About The Author
Gareth Marples is a successful freelance writer providing valuable tips and advice for consumers purchasing free credit reports, online credit card applications and home equity loans. His numerous articles offer moneysaving tips and valuable insight on typically confusing topics.
This "Glossary of Credit Report Terms & Definitions" reprinted with permission.
Other Interesting Topics
[ View Entire Index ] [ Reprint Rights ]