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Credit Vocabulary
| Question | Answer |
|---|---|
| Creditor | A creditor is a person, business, or financial institution that lends money or extends credit to another party |
| Capital | any financial resource or tangible asset that a company uses to run its daily operations, produce goods, and generate future income |
| Collateral | a valuable asset that a borrower pledges to a lender to secure a loan or line of credit |
| Principal | the portion of a loan repayment that directly reduces the original amount borrowed, excluding interest, fees, or other charges |
| Finance charge | the total cost of borrowing money or using credit, expressed as a dollar amount that covers both interest and extra fees |
| Debt collector | is a person or business that regularly collects or attempts to collect past-due debts owed to another party, or operates a business whose primary purpose is debt collection |
| Credit Bureau | a for-profit business that collects financial and personal data from creditors and public records, compiles it into credit reports, and sells it to lenders to help them assess a borrower's creditworthiness |
| Character | you're ability to pay back your loans/debts |
| Credit Report | an official record that shows a company’s borrowing history, payment performance, and overall financial health |
| Capacity | the maximum amount of products or services a company can sustainably produce or deliver within a specified time period using its available resources |
| Credit History | a recorded track record of how a person or business borrows and repays money over time |
| Credit rating | an independent, expert evaluation of a business or government's overall financial health and its likelihood of repaying debt obligations |
| 20/10 Rule | a personal finance guideline that limits consumer debt to a maximum of 20% of your annual take-home pay and 10% of your monthly take-home pay |
| Debtor | an individual, company, or entity that owes money, goods, or services to another party |
| Bankruptcy | Bankruptcy helps people who can no longer pay their debts get a fresh start by liquidating assets to pay their debts or by creating a repayment plan |
| Secured Loans | a loan backed by company assets or collateral |
| Unsecured Loans | a financing option that does not require you to pledge physical assets, like property or equipment, as collateral |
| Reaffirmation | a voluntary legal agreement made during bankruptcy proceedings where a debtor promises to repay a specific debt—such as a car loan or mortgage—that would otherwise be wiped out by the bankruptcy court |
| Involuntary bankruptcy | a legal process initiated by creditors to force a debtor into bankruptcy when they fail to meet significant debt obligations |
| Voluntary bankruptcy | Voluntary bankruptcy is a type of bankruptcy where an insolvent debtor brings the petition to a court to declare bankruptcy because they are unable to pay off their debts |
| Discharged debts | a legal release from personal liability for specific financial obligations, meaning the debtor is no longer legally required to pay them |
| Liquidation | Liquidation is the process of converting a company's assets into cash to pay off creditors and shareholders, usually signaling the end of business operations |
| Reorganization | a major change to a company's legal, ownership, operational, or financial structure |
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