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Credit Vocabulary
| Term | Definition |
|---|---|
| creditor | entity (person or institution) that extends credit by giving another entity permission to borrow money intended to be repaid in the future |
| capital | relating to or being assets that add to the long-term net worth of a corporation, the amount of money an applicant has |
| collateral | an asset that can back or act as security for the loan |
| principal | refers to the original sum of money borrowed in a loan or put into an investment |
| finance charge | fee charged for the use of credit or the extension of existing credit |
| debt collector (collection) | company or agency that is in the business of recovering money owed on delinquent accounts |
| credit bureau | a private business that compiles information on consumers' creditworthiness and provides this information to lenders |
| character | a borrower's reputation or track record for repaying debts, reflected by the applicant's credit history |
| credit report | detailed breakdown of an individual's credit history prepared by a credit bureau |
| capacity | measures the borrower's ability to repay a loan by comparing income against recurring debts and assessing the borrower's debt-to-income (DTI) ratio |
| credit history | measure of your ability to repay debts and demonstrated responsibility in repaying them |
| credit rating | a score or grade that a company or organization gives to a possible borrower and that indicates how likely the borrower is to repay a loan |
| 20/10 rule | says your consumer debt payments should take up, at a maximum, 20% of your annual take-home income and 10% of your monthly take-home income |
| debtor | a person who owes a debt, company or individual who owes money |
| bankruptcy | the quality or state of being reduced to a state of financial ruin |
| secured loans | business or personal loans that require some type of collateral as a condition of borrowing |
| unsecured loans | loan that doesn't require any type of collateral; instead of relying on a borrower's assets as security, lenders approve unsecured loans based on a borrower’s creditworthiness |
| reaffirmation | agreement a debtor makes with a lender to repay some or all of a debt despite going through bankruptcy proceedings |
| involuntary bankruptcy | bankruptcy declared upon petition of creditors |
| voluntary bankruptcy | bankruptcy declared upon petition of the debtor |
| discharged debts | cancellation of a debt due to bankruptcy, debtor is no longer liable for the debt and the lender is no longer allowed to make attempts to collect the debt |
| liquidation | to determine by agreement or by litigation the precise amount of (indebtedness, damages, or accounts) |
| reorganization | significant and disruptive overhaul of a troubled business intended to restore it to profitability |
Created by:
ellieadams
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