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Credit Bureau:
Organization who compiles and records information about an individual's
credit history. Their responsibilities include: supplying lenders with
credit information on potential borrowers, receiving and recording
information from creditors about consumer payment histories and spending
habit, and offering consumer's individual copies of their credit file.
Credit Limit:
How much spending a creditor will allow a consumer to do. Generally, the
limit is based on the consumer's credit worthiness.
Credit Rating:
An individual's credit history determines her or his credit worthiness to
potential lenders. There is no set scoring system but most creditors share
similar criteria for borrowers. The better a consumer handled their past
credit; the more stable his or her employment and residence history, and
as long as they have not applied for ‘too much’ credit in the past, the
more likely they will have a good credit rating.
Debt to Income Ratio:
The percentage of monthly income that is devoted to paying off unsecured
debts, not counting mortgages, etc. High Debt/Income ratios (25% and up)
imply a bad credit rating and can make getting a loan or additional credit
unlikely. The actual ratio is the total monthly-unsecured debt payments
divided by monthly net income multiplied by 100. Some creditors consider
gross monthly income instead, so it helps to know the Debt/Income ratio
for both figures.
Default:
When a borrower fails to pay off a debt by the arrangements set up by the
creditors.
Fair Credit Reporting Act:
If you notify a credit bureau of a mistake on your credit report, they
must verify that mistake or change it within 30 days. Also, you are
entitled to see your credit report and you are entitled to a free copy
from any credit bureau responsible for a report that led to a creditor
denying you credit. You must ask for your free credit report with one
month of being denied credit.
Fair Debt Collection
Practices Act: A Federal bill
passed by Congress describing the tactics that third party collection
agencies may use to attempt to recover past due debts.
Fixed Rates:
The interest rate/payment will be the same throughout the life of the
loan.
Foreclosure:
If someone defaults on mortgage payments, the lending institution may
claim the mortgaged property as collateral. This is done usually to regain
the original monetary investment.
Garnishment:
A court order to a debtor's employer to deduct a certain percentage from
an employee's wages to be paid to a creditor for payment owed. Percentages
will vary from state to state.
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