Credit Report Glossary
If you have requested a credit report, you may feel a bit overwhelmed by the terminology found in this document - it can seem like a foreign language. The problem is made worse by the fact that common terms can be used differently by the people who put these reports together. This glossary will attempt to provide clear definitions for the most common terms found on credit reports as well as other terms that are used when discussing credit scores.
Account payment history - this is a record of the monthly payments that have been made since the account was created. This information can be used when trying to determine credit risk.
Account review - this is where borrower’s credit history is reviewed by a creditor.
Alternative financial services - this refers to non-traditional forms of lending funds such as microfinance. This type of financial service is most often used by people who would be considered low-income borrowers.
AnnualCreditReport.com - this is a website that is provided by the three main consumer reporting agencies in the United States. Consumers who are based in the US are able to obtain up to three free credit reports each year through this website.
Application scoring - this is an attempt to objectively evaluate credit applications in order to predict the risk.
Bad debt - refers to an amount of money that is owed to a creditor that has been written off as a loss. This happens when the lender has run out of options for retrieving this money or the borrower has declared bankruptcy.
Bankruptcy - this is a situation where a person or business is unable to repay their creditors. In the US there are statutes that govern the process and declaration of bankruptcy.
Borrower - a person who obtains funds with the understanding that it will later need to be paid back. In most instances, the individual will not only need to pay back the loan, but they might also be expected to pay interest as well.
Business file - a credit file for a business
Collateral - refers to assets that an applicant can offer to guarantee a loan. For example, the individual may use their home as collateral, and this means if they fail to repay the loan they will forfeit this property.
Comments on accounts - this refers to additional information that is added to a credit file. This comment may be provided by the consumer or the creditor.
Consumer reporting agency - see credit bureau
Consumer statement - this is where a consumer decides to add a statement to their credit file. They may decide to do this if they feel that there is data in the file that required further explanation.
Cost of credit - the amount of money that a creditor adds to loan as a charge.
Credit algorithm - this refers to a complex mathematical formula that is used to determine a potential borrower’s credit score. The aim of algorithm is to try to determine the likelihood that the borrower will be able to repay the loan.
Credit Bureau - a company that conducts research and provides credit information to creditors. The credit bureau is a for-profit business that provides credit scores in return for a payment.
Credit dispute - refers to a situation where a consumer objects to something on their credit report, and they request an investigation.
Credit grantor - another name for creditor
Credit History - this is a detailed summary of an individual’s dealings with creditors.
Credit limit - the maximum amount that a person can borrow on a trade line.
Credit obligation - is a debt that a person or business is legally required to repay.
Credit rating - is an analysis of a potential borrower’s credit history. It differs from a credit score in that it is not based on a mathematical formula but instead on the interpretation of a credit expert.
Credit reference agency - see credit bureau
Credit report - is a document that provided an in-depth analysis of an individual’s or business’s credit history. It will include information such as current balances and any debts that are still outstanding.
Credit report monitoring - this is the act of monitoring a credit history in order to discover any suspicious activity.
Credit risk - this refers to the risk that the borrower will default on their loan or make late payments. If the individual is viewed as a low credit risk, they will find it easier to obtain loans - they might also benefit from lower interest payments.
Credit score - this is a statistical summary of a potential borrower that is used to determine if they are suitable for a loan. It is based on the idea that the borrower’s historical dealings with credit can be used to predict their future actions.
Credit status - this is an assessment that a creditor makes of a potential borrower’s creditworthiness.
Credit tracking - see credit report monitoring
Credit utilization rate - refers to the percentage of available credit that the borrower is currently utilizing. The credit utilization is one of the factors that are used when determining the individual’s credit score.
Creditor - refers to any entity (individual or institution) that provides credit to other people.
Creditor class - the type of creditor that will be lending the money (e.g. credit card company)
Creditworthiness - see credit risk.
Data mining - this is another way of describing the process for obtaining a credit score.
Debit card - is a type of card where the consumer makes purchases using money coming directly from their checking account.
Debt-to-available-credit rating - refers to the amount of money that a borrower already owes compared to the amount of credit that is available to them. If they have a high debt-to-available-credit rating, it will mean that they will be considers a higher risk.
Default - this is when there is a failure to repay a loan or make a repayment when it is due.
Deferred - is where payment of a loan is deferred until a later date.
Delinquencies - occasions when the borrower has failed to make repayments on loans when they were due. For example, the individual failed to make the minimum repayment on the credit card on time.
Disclosure - this is where a consumer is allowed to see their credit file.
Equifax - one of the most popular consumer reporting agencies in the US, and it holds information on 400 million credit holders around the globe.
Experian - this is a consumer reporting agency that is commonly used by creditors in the United States.
Fair Credit Reporting Act (FCRA) - this is a federal law that came into force in 1970 to ensure that consumers can gain free access to their credit report (although it does not mean that they are entitled to have free access to their credit score).
Federal Trade Commission (FTC) - is the organization in the US that is responsible for protecting consumers. For example, the FTC regulates the amount that consumers will need to pay to obtain their credit scores.
FICO Score - this is a credit score that is provided by the FICO Company. The FICO algorithm is the most popular way to determine a credit score in the United States.
Finance charge - see cost of credit
Foreclosure - is where a creditor sells mortgaged property in order to recoup the loan that has defaulted.
Grantor - the entity offering the credit.
Hard inquiry - this means that a copy of the credit report has already been sought for the individual or business. If the individual has many hard inquires, it usually means that they have requested many loans.
High credit - is the largest amount of credit that the consumer has obtained using a trade line.
Individual account - is where only one individual is responsible for paying back any money borrowed.
Inquiry - a request to view a credit report.
Insolvency - the inability of a debtor to repay the money they owe.
Installment credit - this is one of the most popular types of loans, and it is where repayments are made on a regular basis. A mortgage is a type of installment credit.
Judgment - a court has provided a ruling in regards to a borrower’s financial obligations.
Late payment - see delinquencies
Lender - is a person or institution that provides funds to a borrower with the understanding that this will be later paid back - usually with interest.
Loan - something that is provided with the understanding that it will be later returned.
Loan balance - the amount of the loan that remains unpaid
Loan purpose - is the reason the borrower gives for requiring the loan. This is one of the factors that will be considered when determining the likelihood that the loan will be repaid.
Major delinquency - an example of this would be a mortgage that has ended up being foreclosed.
No file found - there is no credit history for the person looking for credit.
Obligation - this can refer to any debt .
Personal creditor - this refers to an individual who loans money to their friends and family. This type of loan will usually not involve any type of interest, and there will be no legal contract involved.
Possibility of default - is the likelihood that a borrower will default on a loan in the future.
Potential borrower - is the person or business that has applied for credit.
Principle balance - this is the amount of a loan that needs to be repaid but does not include interest or any other charges.
Prospective lenders - are lenders who are considering an application for credit.
Public record - this is information about a borrower’s credit situation that has been obtained through court order. It can include things such as past bankruptcies.
Real creditor - this type of creditor will expect those individuals looking to borrow money from them to enter a legal contract. Banks and finance companies are examples of real creditors.
Revolving account -a type of credit account where the borrower has the option of deferring repayment of the loan until a later date, but they will need to pay more interest as a result. A credit card would be an example of a revolving account.
Risk-based pricing - this is where the interest rate is determined by the amount of risk associated with the loan. It means that if the borrower is considered to have a high degree of creditworthiness, they may pay a lower interest rate.
Scoring model - is the statistical formula that has been used to determine the credit score.
Soft inquiry - is when a person has asked to see their own credit report.
Tax lien - is a security interest that is imposed on people who have failed to pay taxes. This information can appear on credit reports.
Trade line - this is more technical term for ‘account’. Most individuals will have multiple trade lines.
TransUnion - is the third largest consumer reporting agency in the United States. It not only provides credit reports for businesses but also for consumers.
Unsecured loan - a loan that is not backed by any collateral