Financial Glossary & Terms
Financial Terms & Phrases
3-in-1 credit report
Credit reports combining the data from the three major credit bureaus –Experian, TransUnion and Equifax – that allows you to compare and analyze details of your credit report side-by-side.
In online banking and electronic transfers, the ACH authorization provides access to the lender or credit line issuer to your bank account for the purpose of debiting and crediting bills and payments.
Paying your debts or loans following a fixed schedule and amount all throughout its term.
This is the amount you pay once a year relative to owning a credit card. Annual fees can vary depending on the issuer and the type of credit card you own. Generally, annual fees start for as low as $10, but others go as high as $500 or more.
Annual Percentage Rate (APR)
The yearly interest rate to the total amount of your loan. Generally, loans with lower APRs are more favorable as they also lead to lower installment amounts.
Property or any other valuable object that holds financial value (house, car, jewelry, savings, high-end bags, etc.). Assets are often used as collateral so one can be qualified for secured loans.
A person who uses a credit line under your name. Typically, an authorized user uses a credit card with his name on it. However, the primary account owner is the responsible to pay down the credit bill. Becoming an authorized user for someone else’s credit account allows you to share the credit data of the account owner, which in turn can help build or bring down your credit score.
This is also known as poor credit. Bad credit refers to a person’s insufficient creditworthiness. In the FICO scoring system, bad credit typically begins at 600, which gets worse when it falls even lower. Lenders and credit issuers typically qualify individuals with bad credit as high-risk borrowers, charging them with higher interest rate and/or limited credit amount, among other conditions.
This refers to the standing loan amount you need to pay to the lender. It may also refer to the amount of money you have in your account.
Bankruptcy refers to the legal status of a person, company or organization wherein one is unable to pay the outstanding debts. It is a federal court process that frees you up from repaying the debt. Bankruptcy taints your credit standing for at least seven years and should be taken only as a final resort.
The person or individual who receives money out from a loan. The borrower is also held responsible of paying back the money back according to the agreement with the lender.
This is a finance tool used to analyze cash flow and allocate income to various expenses. The budget allows you to live within your income and prevent overspending.
Refers to the money or cash you acquire in advance, coming from a creditor or credit issuer. Cash advances are often done to bridge short-term financial gaps with the promise of paying the loan back, plus interest, on the subsequent paychecks. Cash advances are typically obtained against your credit card (which you withdraw from an ATM terminal) and from other third-party lenders.
The process of declaring a delinquent credit account that it is not likely to get repaid. Creditors usually declare a charge off to an account or credit line after the borrower has failed to provide payments within six months. A charge off can badly hurt your credit score and stays on your record for seven years. A charged off account is also typically turned over to a collections agency.
An asset or item that holds financial worth used to secure a loan. The lender seizes the collateral in case the borrower defaults on the loan.
A person or individual who signs a loan or credit line of another borrower. The co-signer typically has good credit score and long credit history which significantly increases the chances of the borrower to be approved for a loan. The co-signer becomes equally responsible in settling the debt. Both the co-signer and the borrower share the credit data with regards to credit account they are involved with.
These are the companies and agencies that collect information regarding a borrower’s financial performance and behavior. The data is made available to individuals looking to examine and monitor their credit standing, as well as to companies and businesses looking to evaluate a potential borrower’s risks. The three largest bureaus in the country today are TransUnion, Equifax and Experian.
This refers to the collection of information pertaining to how you managed your debts and balances as well as the manner of repaying your financial obligations.
Credit limit refers to the maximum amount you can use from your credit limit. While you can spend as much as your credit limit would allow, it is advisable to keep it low (between 10% to 30% of your credit limit) to keep your debts and loans manageable.
The collection of information regarding your financial activity and behavior as gathered by the credit bureaus. The credit report is a document that shows how well you manage your debts and loans, which in turn, allow lenders and credit issuers determine your creditworthiness. Apart from your personal data, the credit report also shows your credit histories, inquiries for new credit accounts, and financial activities like filing for bankruptcy and charge off, etc. Credit bureaus provide a free once-a-year credit report, but you may also request for it anytime for a certain fee.
A three-digit figure that determines your creditworthiness. The credit score is determined by several factors, including but not limited to how timely you pay your bills, inquiries, age of credit accounts and credit utilization rate. The credit score is an important benchmark used by companies and businesses to determine the level of risk associated with lending money or issuing a credit line to you. The credit score can be anywhere 350 to 800, and the higher the digit, the more and better financing opportunities there are for you.
This refers to the money you owe from a person, bank and third-party lending firms.
The process of merging all your debts together and coming up with a single repayment plan. This is often done to bring down the interest rate of your debt and make payments more manageable.
This refers to the event of missing and lacking payments for credit accounts, loans and debts for an extended period of time. This may result to legal actions made against the borrower.
A financial term used to describe late or missing payments for credit cards, loans and other debts.
The process of paying your loan back earlier than the agreed loan term. Your lender may or may not penalize you for early pay-offs.
Refers to the fees, charges and all the other costs associated to obtaining and using a credit line or loan.
An interest rate of a loan or card that remains the same and never changes all throughout the term.
A person or individual who promises to pay a loan or debt should the main borrower becomes delinquent or defaults on the loan.
Otherwise known as “hard pulls,” hard inquiries are when a potential lender, credit issuer or any other business or organization pulls out your credit report and assess whether you qualify for their financing products and services. Hard inquiries can impact your credit score for a year and stays on your report for two years.
This refers to a status wherein a lender, credit issuer or banking institution puts a halt on an application until the borrower is able to satisfy its requirements and conditions.
The amount a borrower pays to the lender for being able to take a loan. It is obtained by taking and agreeing on a certain percentage of the loan amount, which becomes payable on top of the principal amount on the agreed time.
The percentage of the total loan amount charged as the cost of borrowing. An interest rate is often expressed as a yearly rate or annual percentage rate (APR).
This refers to paying a loan or debt on equal amounts spread all throughout the loan term. As opposed to paying the debt in bulk, installments allow you to make small equal payments each month until the entire loan is paid off.
This is the illegal act of obtaining another person’s personal and financial data and using such information to make purchases and perform other financial transactions. The theft impersonates the victim by providing a company or business with the victim’s valid information such as social security number, bank account number and credit card information.
Refers to an event wherein a borrower is sued by the lender and wins. A court order is then issued to force the borrower to pay the outstanding loan. A judgment on your credit report can taint your status for six years.
Knowledge – Based Authentication
KBA is the process of verifying information by answering a “secret” question, which ultimately proves your identity. KBA is often used to access financial products and services online.
An individual or financing firm that provides loans and credit to borrowers.
Line of Credit
An arrangement between the borrower and lender, usually a credit issuer, wherein you can use and spend funds which you then need to pay and refurbish. The most popular form of a line of credit is the credit card.
A document or contract which details all the information pertaining to the loan, including the loan amount, interest, due dates and loan term.
This refers to the time frame or period when you need to settle the entire loan or debt.
A specific amount you need to pay every month.
Refers to a type of loan related to acquiring a property, such as a home. It also refers to the monthly payment you make to cover the said loan, spanning a certain time frame, typically from 15 to 30 years.
This is a person’s total financial value when his liabilities are subtracted from his assets. Net worth gauges your financial wealth. The higher your net worth is the more remaining assets you have after paying off your debts. On the other, a negative net worth means you have more debts than your assets, and your assets are insufficient to cover them.
NSF is a banking term used to refer to an account not having adequate funds to cover bills, purchases and payments.
The amount of debt or loan that still has not been paid.
A web-based service offered by a bank or financial institution. A borrower enrolled in online banking can perform deposits, pay bills, automate payments and make transfers, among others.
The process of evaluating a potential borrower’s eligibility for a loan or credit line.
The total amount of a loan, excluding the interest, that a borrower obtains from a lender.
The agreed day between the borrower and lender when a payment or paying off the entire loan is to be made.
A popular term used by lenders wherein they’re able to get back to potential borrowers with their decision within a 24-hour time frame.
An arrangement wherein a credit holder uses part or all of his available credit. The funds are refurbished as soon as the credit holder pays off the debt.
The process of setting aside a portion of one’s income or paycheck for a specific purpose or future use.
A type of loan wherein a borrower provides an asset as collateral, such as house, car and other investments. The lender acquires the right to seize and forfeit the asset should the borrower becomes delinquent or defaults on the loan.
Also known as a soft pull, this refers to the event when you or another party pulls out your credit report for purposes un-related to credit application. You may perform a soft inquiry to monitor your own credit status, as well as to satisfy the requirements of a potential employer, landlord etc.
A type of loan which doesn’t require any collateral to pay for. As opposed to secured loans, unsecured loans typically higher interest rates to offset some of the borrowers’ risks.
Refers to paying the loan amount with a lesser amount than agreed with the lender.
Also known as adjustable rate, a variable rate is a type of interest rate that fluctuates over a loan’s lifespan.
A process typically performed by a lender, bank or a financing institution which aims to establish the accuracy and truthfulness of information submitted by a borrower.
A loan application that the lender is no longer placed into consideration.
Refers to the beginning of the year up to the present date.
Zero-Percent (0%) Financing
A loan taken without any interest.
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