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Credit Vocabularly
| Term | Definition |
|---|---|
| Creditor | A person or company to whom money is owed |
| Capital | Wealth in the form of money or other assets owed by a person or organization |
| Collateral | Collateral is an asset or property that a borrower pledges to a lender |
| Principal | Original amount of a loan or investment that serves as the basis for interest calculations |
| Finance Charge | The total cost a borrower pays for a loan or credit |
| Debt Collector (Collection) | A person or company that tries to recover past-due debts for a creditor, either by collecting payments on behalf of the original lender or by purchasing the delinquent debt at a discount and collecting it for their own profit |
| Credit Bureau | a private company that collects, analyzes, and sells information about a person's or business's creditworthiness |
| Character | A borrower's reputation, track record, and willingness to repay debts |
| Credit Report | A comprehensive statement of an individual's credit history, detailing their borrowing and repayment activities, current debt, and other financial information |
| Capacity | A borrower's financial ability to repay debts and fulfill financial obligations, often assessed by lenders based on cash flow and assets |
| Credit History | The detailed record of a person's borrowing and repayment activity over time, compiled by credit reporting agencies |
| Credit Rating | An assessment of an entity's ability and willingness to repay its financial obligations, such as a loan or bond, by an independent credit rating agency |
| 20/10 Rule | A financial strategy to limit debt, advising you to keep your total consumer debt below 20% of your annual take-home pay and your monthly debt payments at no more than 10% of your monthly take-home pay |
| Debtor | A person, organization, or entity that owes money to another party (the creditor) for a loan, goods, or services received |
| Bankruptcy | A legal process for an individual or business that cannot repay outstanding debts |
| Secured Loans | A type of loan backed by an asset, or "collateral," such as a home or car, which the lender can seize if the borrower defaults |
| Unsecured Loans | A loan not backed by any collateral |
| Reaffirmation | The voluntary agreement a debtor makes with a creditor during bankruptcy to remain legally obligated for a debt after the bankruptcy discharge has been granted |
| Involuntary bankruptcy | A legal proceeding in which creditors file a petition with a bankruptcy court to force a debtor into bankruptcy |
| Voluntary Bankruptcy | A legal proceeding initiated by an individual or business debtor who recognizes they are unable to pay their debts |
| Discharged Debts | An obligation that a debtor is permanently released from paying by a court order, most commonly through bankruptcy proceedings |
| Liquidation | The process of converting a company's assets into cash, selling them off to pay its creditors, and officially ending its operations |
| Reorganization | The process of restructuring a company's capital, assets, and/or liabilities to improve its financial health, operational efficiency, or overall strategy |
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