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Credit Vocab
| Question | Answer |
|---|---|
| Creditor | A person to whom money is owed |
| Capital | The amount of money that an applicant has |
| Collateral | An asset that a borrower uses to secure a loan |
| Principal | The money you originally agreed to pay back |
| Finance charge | The cost of consumer credit in a dollar amount |
| Debt collector (collection) | The original creditor has sent the debt to a third-party person or agency to collect it. |
| Credit bureau | Companies that compile and sell credit reports |
| Character | A borrower's reputation or track record for repaying debts |
| Credit report | A statement that has information about your credit activity and current credit situation such as loan paying history and the status of your credit accounts |
| 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 | A financial record of your credit activity |
| Credit rating | Measures the ability of a business or government to repay its financial obligations by looking at its history of borrowing and repaying loans. |
| 20/10 rule | Your total debt shouldn't equal more than 20% of your annual income, and that your monthly debt payments shouldn't be more than 10% of your monthly income |
| Debtor | The party that owes the money (debt) |
| Bankruptcy | A legal process overseen by federal bankruptcy courts |
| Secured loans | Debt products that are protected by collateral |
| Unsecured loans | A loan that doesn't require any type of collateral |
| Reaffirmation | A contract that promises to repay a debt, which would have otherwise been discharged in bankruptcy |
| Involuntary bankruptcy | A legal process by which creditors can “force” an individual or business to enter into bankruptcy |
| Voluntary bankruptcy | A bankruptcy proceeding that a debtor, who knows that they cannot satisfy the debt requirements of its creditors, initiates with a court |
| Discharged debts | Releases a debtor from personal liability of certain debts known as dischargeable debts |
| Liquidation | A credit union has been closed |
| Reorganization | Restructuring a company's finances |
Created by:
Blairburnett
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