An account history is a record that keeps track of all activity within an account such as trades, purchases, and other transactions.

An account history is a recording of all the activity that takes place within an account, usually since inception. In a bank account, the account history includes all transactions initiated by the account holder, which would include all credits and debits, as well as passive entries, such as interest on balances, which are credited to the account. The account history of a bank account shows all of the credits, debits, and interests made in the account by the account holder. Bank statements are usually the representation of an account history for a bank account and help individuals reconcile cash movements and balance their accounts. The account history is recorded on the account statement, which is an important document to retain and can be accessed online through most bank client portals.

Account History

An account inquiry is a review of the activity and performance of a financial account. It usually occurs when a person applies for a loan or credit card.

An account inquiry is a review of any type of financial account, whether it be a depository account or credit account. An account inquiry is a review of any type of financial account, whether it be a depository account or credit account. An account inquiry could be done per the request of a bank, lender, or other financial institution that requires a copy of an account history when an individual, business, or other entity applies for credit or a loan. An account inquiry is often done per the request of a bank, lender, or other financial institution, such as a credit reporting agency (also known as a credit inquiry). An account holder may initiate an account inquiry on his or her own behalf, particularly if questionable activity is suspected—such as debits that the account holder does not recall authorizing or charges that look unfamiliar.

Account Inquiry

The Address Verification Service (AVS) is used by financial institutions to identify fraudulent or suspicious credit card transactions.

The Address Verification Service (AVS) is a tool provided by credit card processors and issuing banks to merchants in order to detect suspicious credit card transactions and prevent credit card fraud. The Address Verification Service (AVS) is a tool provided by credit card processors and issuing banks to merchants in order to detect suspicious credit card transactions and prevent credit card fraud. The credit card processor sends a response code back to the merchant indicating the degree of address matching, thereby authenticating ownership of a credit or debit card in a non-face-to-face transaction. The Address Verification Service (AVS) is a tool that enables merchants to detect suspicious credit card transactions and prevent credit card fraud. If the address provided by the customer does not match the address the issuer has on file for that customer, the AVS code will indicate the mismatch between the two addresses and the transaction may be declined.

Address Verification Service (AVS)

Adequate notice is a written document that specifies the terms and conditions of a loan or extension of credit to a consumer in detail.

CFPB, Laws and Regulations: Truth in Lending Act

Adequate notice for a closed-end credit agreement must include:
The term of the credit agreement, or the time period for which the credit is advanced;
The amount financed, including an itemization of the amount;
The finance charge;
The schedule of payments;
The total of those payments;
The identity of the creditor;
Penalties for prepayment or late payments;
And, where applicable, deposits required, total sales costs, demand features, insurance, references to contracts, and security interests.
Adequate notice for an open-end credit transaction includes:
Finance charges, including annual percentage rates and variable-rate disclosures;
The method of determining the finance charge;
Any expectation by the creditor that the borrower make repeated transactions;
The restoration of credit to the consumer as they pay off the balance;
The method and amount of membership or participation fees;
Statement of billing rights; and
Security interests, where applicable.
Susan's application for a credit card from her bank is approved. Adequate notices must adhere to specifications outlined in the Truth in Lending Act (TILA).
Under the TILA, any business or individual who meets the following four criteria must give adequate notice to borrowers of the terms and conditions of the credit agreement:
1.  They extend or offer credit to customers;
2.  They do this regularly (i.e., more than 25 times per year for revolving credit or credit secured by personal property other than a dwelling, and more than five times per year for credit secured by a dwelling);
3.  The credit is subject to a finance charge or payable in more than four installments; and
4.  The credit is to be used for household, personal, or family purposes. However, if the extension of credit involves a credit card, the TILA dictates that issuers must give adequate notice even if the card is not payable in more than four installments, or is not subject to a finance charge, or is used for a business purpose. Adequate notice requires the consumer to be informed of key details of the credit arrangement, such as the annual percentage rate, grace period, annual fee, etc.

Adequate Notice

An adjustment bureau is an organization that focuses on helping businesses collect outstanding debts from delinquent debtors.

An adjustment bureau is an organization that focuses on helping businesses to collect outstanding debts from delinquent debtors. Under the FDCPA, debtors have the right to the following protections:
The right to request validation of the debt in writing;
The right to demand that the adjustment bureau or collection agency cease communications;
The right to collect attorney’s fees from the debt collector if the debtor sues to verify the debt and the debt is found to be bogus;
Freedom from debt collection calls that cost the debtor toll calls;
Limits on the times of day at which debt collectors can call debtors;
Freedom from the use of deceptive or illegal collection practices, such as threats or impersonating law enforcement;
Freedom from use of obscene language by the debt collector;
The right to information about the nature of the call, the name of the person calling, the name of the adjustment bureau they are calling from; and
Freedom from debt collection calls at their place of work. Receiving calls or letters in the mail from adjustment bureaus to collect on outstanding debt can be stressful, especially if you are not in the financial position to pay off the debt. The FDCPA dictates that in the case that a state law is more restrictive than the federal law in governing debt collection practices, the more restrictive state law will be applied. The Fair Debt Collection Practices Act (FDCPA) is the primary federal law governing debt collection practices in the United States.

Adjustment Bureau

An adverse credit history refers to one with a low credit score and is considered a high risk to lenders.

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Direct PLUS Loans are federal loans that graduate or professional students and parents of dependent undergraduate students can use to help pay for college or career school

An adverse credit history is a track record of poor repayment history on one or more loans or credit cards. Borrowers can find out whether they have an adverse credit history by getting a free credit report from each of the three major credit bureaus, Equifax, Experian, and TransUnion. Each adverse item reported to a credit bureau will have differing effects on a borrower’s credit report and credit score. An adverse credit history is a track record of poor repayment history on one or more loans or credit cards. Lenders and creditors care about adverse credit history because if a borrower has had credit problems in the past, they are more likely to have them in the future.

Adverse Credit History Defined

An authorized transaction is a debit or credit card purchase for which the merchant has received approval from the bank that issued the customer’s payment card. 

An authorized transaction is a debit or credit card purchase for which the merchant has received approval from the bank that issued the customer’s payment card. An authorized transaction is a debit or credit card purchase for which the merchant has received approval from the bank that issued the customer’s payment card.
After a credit card is swiped, the payment system sends the card’s details to the merchant’s bank, who is the lead facilitator on an electronic transaction.
Once the merchant bank works with the payment processor to contact the cardholder's financial institution, ensuring that the cardholder has the funds in their account to cover the charge, the authorization is complete. After the consumer swipes their card through a card reader or enters the card’s details in an online merchant’s checkout system, the payment system sends the card’s details to the merchant’s bank (also called the acquiring bank). An authorized transaction is a debit or credit card purchase for which the merchant has received approval from the bank that issued the customer’s payment card. A card could be declined for many reasons, including the following:
1.  The cardholder does not have sufficient funds in their account to cover the transaction or the requested transaction would cause the cardholder to exceed the card’s credit limit.

Authorized Transaction

Available credit refers to how much a borrower has left to spend. This amount can be calculated by subtracting the borrower's purchases from the total credit limit on the account.

For credit cards, and other types of revolving credit, payments go towards increasing the borrower's available credit (which the borrower can then use for additional purchases).
Available credit is the difference between the total credit limit and the amount that the borrower has accumulated through their purchases (in addition to the interest on the amount of their purchases).
For credit card holders, available credit is the amount that is left when you subtract all your purchases (and the interest on those charges) from the maximum credit limit on your credit card. For credit card holders, available credit is the amount that is left when you subtract all your purchases (and the interest on those charges) from the maximum credit limit on your credit card. Available credit refers to how much a borrower has left to spend; this amount can be calculated by subtracting the borrower's purchases from the total credit limit on the credit account. With credit cards (and other types of revolving credit), payments go towards increasing the borrower's available credit (which the borrower can then use for additional purchases).

Available Credit

The back-end ratio indicates what portion of a person's monthly income goes toward paying debts.

The back-end ratio, also known as the debt-to-income ratio, is a ratio that indicates what portion of a person's monthly income goes toward paying debts. Like the back-end ratio, the front-end ratio is another debt-to-income comparison used by mortgage underwriters, the only difference being the front-end ratio considers no debt other than the mortgage payment. The back-end ratio, also known as the debt-to-income ratio, is a ratio that indicates what portion of a person's monthly income goes toward paying debts. Like with the back-end ratio, certain lenders offer greater flexibility on front-end ratio, especially if a borrower has other mitigating factors, such as good credit, reliable income, or large cash reserves. The back-end ratio is calculated by adding together all of a borrower's monthly debt payments and dividing the sum by the borrower's monthly income.

Back-End Ratio

Bad credit refers to a person's history of failing to pay bills on time, and the likelihood that they will fail to make timely payments in the future.

Bad credit refers to a person's history of failing to pay bills on time, and the likelihood that they will fail to make timely payments in the future. Most Americans who have ever borrowed money or signed up for a credit card will have a credit file at one or more of the three major credit bureaus, Equifax, Experian, and TransUnion.﻿﻿﻿ The information in those files, including how much money they owe and whether they pay their bills on time, is used to compute their credit score, a number that's intended as a guide to their creditworthiness. Either move can damage your credit score.
If bad credit has made it difficult for you to get a regular credit card, consider applying for a secured credit card. If you have bad credit (or fair credit), there are steps you can take to get your credit score above 669—and keep it there. Having high total credit card debt damages your credit score and paying more than the minimum due can help raise it.

Bad Credit

A balance-to-limit ratio is the amount of money you owe on your credit cards compared to your credit limit. 

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The balance-to-limit ratio is a comparison of the amount of credit being used to the total credit available to a borrower. The balance-to-limit ratio is the sum of all the balances plus the sum of all credit limits divided by the total balance and total credit limit. For example, if card A has a $300 balance and a $1,000 limit, card B has a $400 balance and a $2,000 limit, and card C has a $600 balance and $3,000 limit For scoring purposes, it doesn't matter whether you pay your balance in full each month or carry a balance if you keep your balance-to-limit ratio score low on each card. The balance-to-limit ratio is also known as the credit utilization ratio, and is used in the calculation of credit scores.

Balance-To-Limit Ratio

Baycorp Advantage was the former name of a major Australian credit bureau.

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The term Baycorp Advantage refers to the name of a financial services company involved in debt collection and credit reporting in New Zealand and Australia. Baycorp operates as a collection agency in New Zealand, Australia, and the Philippines while Veda Advantage was purchased by Equifax in 2016.
Baycorp Advantage was the name of a publicly-traded financial services company listed in both New Zealand and Australia on their respective stock exchanges. This side of the business retained the Baycorp name, while the credit reporting side was renamed Veda Advantage.
In 2009, Veda Advantage invested in its credit monitoring business by acquiring the identity-theft protection specialist, Secure Sentinel.﻿﻿ Veda Advantage also purchased two other firms, Datalicious and EDX Australia in 2014 and 2016 respectively. Baycorp Advantage was formed after Baycorp Holdings and Data Advantage merged in 2001.﻿﻿ As mentioned above, the business split five years later, after Baycorp was purchased by Trans-Tasman Collections. The term Baycorp Advantage refers to the name of a financial services company involved in debt collection and credit reporting in New Zealand and Australia.

Baycorp Advantage

The term “Buy Here Pay Here (BHPH)” refers to auto dealerships in which the financing for the vehicles purchased is done in-house.

The term “Buy Here, Pay Here (BHPH)” refers to auto dealerships in which the financing for the vehicles purchased is done in-house. These types of dealerships are typically involved in the sale of heavily-used cars, and they tend to cater to customers with relatively poor credit ratings.
Buy here, pay here refers to a type of car dealership that provides financing for its customers in-house. BHPH dealerships have been known to offer flexible terms, such as 0% down payments, no-interest financing periods, and loans without any preliminary credit check. In an effort to expand his revenues, David decides to focus his marketing strategy on subprime customers who may be unable to afford the financing terms offered by his larger and more traditional competitors. To that end, David begins offering flexible financing terms on an in-house basis, effectively becoming a BHPH dealership.

Buy Here Pay Here (BHPH)

Interest rate caps are commonly used in variable-rate mortgages and specifically adjustable-rate mortgage (ARM) loans.

An interest rate cap structure refers to the provisions governing interest rate increases on variable-rate credit products. Investors in a variable rate interest product will pay an interest rate that is based on an underlying indexed rate plus a margin added to the index rate. The limit is an interest rate that your loan can never exceed meaning that no matter how much interest rates rise over the life of the loan, the loan rate will never exceed the predetermined rate limit. A periodic interest rate cap refers to the maximum interest rate adjustment allowed during a particular period of an adjustable-rate loan or mortgage. An interest rate cap structure refers to the provisions governing interest rate increases on variable-rate credit products.

Interest Rate Cap Structure

A clean-up requirement is a stipulation that is intended to help lenders ensure that borrowers who use revolving lines of credit pay their debts.

A clean-up requirement is a condition that is often written into the contracts of annually renewable lines of credit or revolving lines of credit. A clean-up requirement clause may require the borrower to pay off any outstanding balance on the line of credit and then cease to use the line of credit for a specified period of time. A clean-up requirement is a condition that is often written into the contracts of annually renewable lines of credit or revolving lines of credit. The terms of a clean-up requirement may call for the borrower to clear the balance on its line of credit and keep it at zero for 90 consecutive days (during a 12-month period). The intent of a clean-up requirement clause is typically to ensure that businesses do not start relying too heavily on a line of credit they establish and that their revenue from sales is the primary source of income.

Clean-Up Requirement

Closed-end credit is a loan or extension of credit in which the proceeds are dispersed in full when the loan closes and must be repaid by a specified date.

Closed-end credit is a loan or type of credit where the funds are dispersed in full when the loan closes and must be paid back, including interest and finance charges, by a specific date. Closed-end credit is a loan or type of credit where the funds are dispersed in full when the loan closes and must be paid back, including interest and finance charges, by a specific date. Closed-end credit is a loan or type of credit where the funds are dispersed in full when the loan closes and must be paid back, including interest and finance charges, by a specific date. Unlike open-end credit, closed-end credit does not revolve or offer available credit. In general, interest rates for closed-end credit are lower than for open-end credit.

Closed-End Credit

Collection proof is a word used to describe a person that has no income or assets that can legally be seized for debt repayment.

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NRS 17.150 Docketing of judgments of state and federal courts; recording of transcripts, abstracts and copies of judgments; liens on real property; duration of liens; affidavit required of judgment creditor who records judgment or decree

"Collection-proof" is a term to describe a person who has no income or assets that can legally be seized for debt repayment. A creditor who obtains a judgment can attempt to garnish a debtor's wages, levy their bank account, seize their vehicle, or place a lien against their real estate, but none of these efforts will succeed if the debtor is collection proof and doesn't have these assets or income. Collection-proof describes a situation where a person's assets or income cannot be seized by a creditor or agency for debt repayment. A primary residence, vehicles, personal property, and household goods are among the items that usually cannot be seized and sold to repay a debt.
Being collection-proof is not a permanent state of affairs. Certain assets may also be collection-proof, depending on the debtor's state of residence and type of debt.

Collection-Proof

A confirmed letter of credit is a letter of credit with a second guarantee obtained by a borrower in addition to the first letter of credit. 

The term confirmed letter of credit refers to an additional guarantee to the original letter of credit obtained by a borrower from a second bank. Because the issuing bank of the first letter of credit is in a different country and its creditworthiness is not known, Company A tells the buyer that it needs a second letter of credit from another bank in order to complete the transaction. In some cases, the seller may only require the second letter of credit represent a percentage of the total due because the sale already comes attached with a credit letter by the first bank. Just like a (first) letter of credit, the confirmed or second letter of credit has advantages for both the seller and the buyer by protecting both their interests. A confirmed letter of credit is a guarantee a borrower gets from a second bank in addition to the first letter of credit.

Confirmed Letter of Credit

A consumer credit file contains data about a consumer’s past borrowing and repayment history, and is used to determine their credit score. 

A consumer credit file is a collection of data about an individual’s borrowing and repayment activity. The credit score itself is a statistical number based on an algorithm that measures your credit risk using the information in your credit file. You can see what’s in your credit file by requesting your credit report from each of the three main credit bureaus. A recent example was the data breach at Equifax, one of the three consumer credit bureaus that maintain credit files, that compromised personal information, such as Social Security numbers and dates of birth, relating to 147 million Americans. Most of your consumer credit file is dedicated to information about your current and past accounts, including when you opened each account, what your highest balance has been, the type of account (whether it is an individual or joint account), the account balance, the date of your last payment, and the amount of your last payment.

Consumer Credit File

Consumer credit is personal debt taken on to purchase goods and services. Credit may be extended as an installment loan or a revolving line of credit.

Consumer credit is personal debt taken on to purchase goods and services. The main disadvantage of using revolving consumer credit is the cost to consumers who fail to pay off their entire balances every month and continue to accrue additional interest charges from month to month. Installment credit usually offers lower interest rates than revolving credit as an incentive to the consumer. A credit card is one form of consumer credit. Because credit cards are relatively safe to carry, America is increasingly becoming a cashless society in which people routinely rely on credit for purchases large and small.

Consumer Credit

Country club billing is a former system that credit card companies used until the 1970s involving sending copies of original sales drafts to cardholders.

Country club billing was a former billing system used by credit card companies until the 1970s that involved including copies of original sales drafts to cardholders in their monthly statements. This was done to provide proof of each purchase that was recorded on the card. Country club billing was a former billing system used by credit card companies until the 1970s that involved including copies of original sales drafts to cardholders in their monthly statements. This was done to provide proof of each purchase that was recorded on the card. As credit card companies moved from mailing copies of sales drafts to itemizing transactions on one or two pieces of paper, they reduced usage of paper and in so doing eliminated a portion of operating expenses. Country club billing refers to an old-school accounting method, using paper billing statements. Another theory was that country clubs have a billing methodology of recording all sales transactions (food, drink, personal services), keeping them in a file for an individual member, and then presenting the bill at the end of a month.

Country Club Billing

Credit agencies gather debt information that is used to generate a score that indicates creditworthiness.

A credit agency is a for-profit company that collects information about individuals' and businesses' debts and assigns a numerical value called a credit score that indicates the borrower's creditworthiness. Credit agencies, also known as credit rating agencies, help potential lenders and creditors determine whether to lend or extend credit to an individual or business, by predicting the likelihood that the borrower will repay the debt in a timely manner. The information provided to credit agencies includes how much credit is available to that borrower, how much of the available credit they have used, and what their repayment activity looks like. However, in 1970 the Federal Trade Commission passed the Fair Credit Reporting Act (FCRA), which requires the major credit agencies to provide a free copy of your credit report once every 12 months upon request. Creditors and lenders, such as credit card companies and banks, report their customers' borrowing activity and history to credit agencies.

Credit Agency

A credit application is a formal request by a borrower to a lender for credit.

A credit application is a request for an extension of credit. A lending decision will be based on a hard credit inquiry that provides details on a borrower’s credit score and credit history. LendingClub and Prosper, are two of the largest online peer-to-peer lenders in the U.S. offering loans to borrowers through a fully automated credit application that requires no in-person interaction. A credit application is a form used by potential borrowers to get approval for credit from lenders. Typical loans that borrowers may seek to apply for in-person can include bank lines of credit, mortgage loans, and home equity loans.

Credit Application

Credit control includes the strategies a business uses to encourage sales on credit but also those that seek to limit exposure to bad debts.

Credit control, also called credit policy, includes the strategies employed by businesses to accelerate sales of products or services through the extension of credit to potential customers or clients. A restrictive policy is a low-risk strategy, limiting credit only to customers with a strong credit history, a moderate policy is a middle-of-the-road risk strategy that takes on more risk, while a liberal credit control policy is a high-risk strategy where the company extends credit to most customers. At its most basic level, businesses prefer to extend credit to those with “good” credit and limit credit to those with “weak” credit, or possibly even a history of delinquency. Credit control, also called credit policy, includes the strategies employed by businesses to accelerate sales of products or services through the extension of credit to potential customers or clients. Credit control focuses on the following areas: credit period, cash discounts, credit standards, and collection policy.

Credit Control

Credit history refers to the ongoing documentation of an individual’s repayment of their debts.

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Your credit history is a measure of your ability to repay debts and demonstrated responsibility in repaying them. Your credit report includes information about the number and types of your credit accounts, how long each account has been open, amounts owed, amount of available credit used, whether bills were paid on time, and the number of recent credit inquiries. It is recorded in your credit report, which details the number and types of your credit accounts, how long each account has been open, amounts owed, the amount of available credit used, whether bills are paid on time, and the number of recent credit inquiries. In addition, you should pay your bills on time, reduce your credit card debt, apply for new credit very sparingly, and possibly find a co-signer with good credit to join you when seeking new credit. All consumers are guaranteed access to their credit history (via a credit report) and are eligible for one free credit report from each credit bureau on an annual basis.

Credit History

A credit inquiry is a request by an institution for credit report information from a credit reporting agency. 

A credit inquiry is a request by an institution for credit report information from a credit reporting agency. A hard inquiry will affect your credit score, while a soft inquiry will not.
Soft inquiries usually are made when you request a credit report or credit score for yourself.
Credit inquiries are a significant component of the credit market. A credit inquiry is a request by an institution for credit report information from a credit reporting agency. For those unable or unwilling to wait two years and who are comfortable paying a small fee, one of the best credit repair companies might be able to get the hard inquiries removed from a credit report sooner. Individuals have a right to obtain free annual credit reports from credit reporting agencies that detail their credit information.

Credit Inquiry

The different categories of debt within a consumer’s credit history, such as credit cards and loans, are collectively called a credit mix.

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Credit mix refers to the types of accounts that make up your credit report. Though having a mix of different types of loans on your credit report can have a positive impact on your credit score, FICO (and common sense) cautions that you should not apply for loans or credit cards you do not need in an attempt to improve this component of your credit score. Not only is your credit mix a small part of your credit score; opening new accounts also affects other factors in your credit score that carry greater weight, such as the length of your credit history, amounts owed, and the number of new accounts. Still, FICO says that consumers with responsibly managed credit cards in their credit mix tend to have higher scores than consumers with few or no credit cards in their credit mix. The different types of credit that might be part of your credit mix include credit cards, student loans, automobile loans, and mortgages.

Credit Mix

Credit references can be a credit report or documented letter from a previous lender, personal acquaintance, or business acquaintance. 

Credit references can be a credit report or documented letter from a previous lender, personal acquaintance, or business acquaintance. Additionally, a credit report will include a credit score that is generated by a credit reporting agency. Credit reports include detailed line items on the borrower’s credit history, the number of credit accounts a borrower has open, the number of accounts a borrower has applied for, and any delinquencies or defaults. Generally, a credit reference letter must include information on the reference such as the name, relationship, and any details pertaining to past credit history. Having a strong awareness of potential individuals or businesses that can be contacted as a credit reference can be helpful in expediting a credit reference process.

Credit Reference

A credit reporting agency is a business that maintains historical credit information on individuals and businesses.

Oversight of all credit reporting agency activities is governed by the Fair Credit Reporting Act (FCRA) and regulated by the Federal Trade Commission and the Consumer Financial Protection Bureau.
Credit reporting agencies partner with a wide range of financial institutions in the industry, including credit card companies, banks, and credit unions. They maintain credit information, calculate credit scores, provide credit reports, and partner with credit issuers for marketing. Several new credit reporting agencies are working to provide greater access to the underbanked population by developing credit reports for thin-file borrowers based on alternative data rather than just credit accounts. Beyond basic credit account information, many credit reporting agencies also receive public records and additional payment data on cell phone bills, utility bills, and rent payments.

Credit Reporting Agency

A credit utilization ratio is the percentage of a borrower’s total credit currently being used. Learn how to improve your credit utilization ratio.

The credit utilization ratio is the percentage of a borrower’s total available credit that is currently being utilized. Shifting credit card balances from an existing card to another will not change the credit utilization ratio, as it looks at the total amount of debt outstanding divided by your total credit card limits. A person’s credit utilization ratio will go up and down with payments and purchases.
Credit utilization is one factor in how credit bureaus calculate a credit score for a borrower. Therefore, borrowers seeking to decrease their credit utilization must have patience and expect that it may take two to three credit statement cycles for credit utilization levels to drop when debt is being paid down. The credit utilization ratio is a component used by credit reporting agencies in calculating a borrower’s credit score.

Credit Utilization Ratio

Credit is a contractual agreement in which a borrower receives something of value immediately and agrees to pay for it later, usually with interest.

How do you define credit? So a credit increases net income on the company's income statement, while a debit reduces net income.
Service credit is an agreement between a consumer and a service provider such as a utility, cell phone, or cable company.
There are many different forms of credit. This introduces a middleperson to the credit agreement: the bank that issued the card repays the merchant in full and extends credit to the buyer, who may repay the bank over time. For example, when a consumer uses a Visa card to make a purchase, the card is considered a form of credit because the consumer is buying goods with the understanding that they will pay the bank back later. The most popular form is bank credit or financial credit.

Credit

The term credit limit is the maximum amount of credit a financial institution extends to a client, for instance on a credit card or a line of credit.

A credit limit is the amount of unsecured or secured credit that a lender will grant a borrower through a revolving loan vehicle like a credit card, personal line of credit or a home equity line of credit. The term credit limit refers to the maximum amount of credit a financial institution extends to a client on a credit card or line of credit. So, if someone has a total credit limit of $10,000 on their credit card or personal line of credit and they have already used $5,000, they would have the remaining $5,000 as available credit that they could access. If a borrower pays their bills on time every month and does not max out the credit card or line of credit, a lender may increase the line of credit.

Credit Limit

Credit scoring generates a score that ranks, on a numerical scale, the credit riskiness of an individual or a small, owner-operated business.

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Credit scoring is a statistical analysis performed by lenders and financial institutions to determine the creditworthiness of a person or a small, owner-operated business. It can be used by lenders as another input in credit decisions and account strategies across the credit lifecycle and can be delivered with a credit file, along with the FICO Score.”
More-advanced methods of credit risk modeling, including structural models and reduced-form models, are used to assess default probability. credit score is based on information in its credit report, including:
Company information (including number of employees, sales, ownership, and subsidiaries)
Historical business data
Business registration details
Government activity summary
Business operational data
Industry classification and data
Public filings (liens, judgments, and Uniform Commercial Code \[UCC\] filings)
Payment history and collections
Number of accounts reporting and details An individual’s credit score is influenced by five categories:
Payment history (35%)
Amounts owed (30%)
Length of credit history (15%)
New credit (10%)
Credit mix (10%)
A small business’ Fair Isaac Corporation’s credit scoring system, known as a FICO score, is the most widely used credit scoring system in the financial industry, employed by more than 90% of top lenders.

Credit Scoring

A credit agreement is a legally-binding contract that documents the terms of a loan agreement. It outlines the details of the loan and its clauses.

A credit agreement is a legally-binding contract documenting the terms of a loan agreement; it is made between a person or party borrowing money and a lender. The credit agreement says that Sarah will pay $6,287 in interest over the life of her loan, and it also lists all the other fees pertaining to the loan (as well as the consequences of a breach of the credit agreement on the part of the borrower).
After Sarah has read the credit agreement thoroughly, she agrees to all the terms outlined in the agreement by signing it. Important lending terms included in the credit agreement include the annual interest rate, how the interest is applied to outstanding balances, any fees associated with the account, the duration of the loan, the payment terms, and any consequences for late payments. In many cases, the terms of a credit agreement for a retail lending product will be provided to the borrower in their credit application. A credit agreement is part of the process for securing many different types of loans, including mortgages, credit cards, auto loans, and others.

Credit Agreement

Credit quality is one of the principal criteria for judging the investment quality of a bond or a bond mutual fund.

Table of Contents
What Is Credit Quality? Lenders may use an individual's FICO score (along with other details on an individual's credit reports) as a way of assessing their credit risk and, ultimately, making a decision about whether or not to extend credit to them. Credit rating agencies–such as Moody's and Standard & Poor's–also issue credit quality ratings for all types of firms in the credit market. Credit rating agencies–such as Moody's and Standard & Poor's–also issue credit quality ratings for all types of firms in the credit market. When credit rating companies assign a letter grade to a company's debt, AAA typically indicates the highest credit quality and D indicates the lowest.

Credit Quality

A credit rating is an assessment of the creditworthiness of a borrower—in general terms or with respect to a particular debt or financial obligation.

U.S. State Ratings And Outlooks: Current List

Moody’s History: A Century of Market Leadership

Statement by Lawrence J. White* for the ‘Roundtable to Examine Oversight of Credit Rating Agencies’ U.S. Securities and Exchange Commission Washington, D.C., April 15, 2009

Research Update: United States of America Long-Term Rating Lowered To 'AA+' On Political Risks And Rising Debt Burden; Outlook Negative

The US Debt Crisis and Downgraded Credit Rating has Global Implications

The Elusive 850: Experian Reveals Traits of Consumers With Perfect FICO® Scores

Table of Contents
What Is a Credit Rating?
Understanding Credit Ratings
A Brief History of Credit Ratings
Importance of Credit Ratings
Factors Affecting Ratings and Scores
Credit Ratings vs. Credit Scores These five factors are included and weighted to calculate a person’s FICO credit score:
1.  Payment history (35%)
2.  Amounts owed (30%)
3.  Length of credit history (15%)
4.  New credit (10%)
5.  Types of credit (10%)
As noted above, FICO scores range from a low of 300 to a high of 850—a perfect credit score that is achieved by only about 1% of the borrowing public. A credit rating or score is assigned to any entity that wants to borrow money—an individual, a corporation, a state or provincial authority, or a sovereign government.
Credit for individual consumers is rated on a numeric scale based on the FICO calculation by credit bureaus.
Bonds issued by businesses and governments are rated by credit agencies on a letter-based system. S&P Global, for instance, has a credit rating scale ranging from AAA (excellent) to C and D. A debt instrument with a rating below BB is considered to be a speculative-grade or junk bond, which means it is more likely to default on loans.
Moody’s issued publicly available credit ratings for bonds in 1909, and other agencies followed suit in the decades after. An entity with good credit but a short credit history is not viewed as positively as another entity with equally good credit but a longer credit history.

Credit Rating

Credit risk is the possibility of loss due to a borrower's defaulting on a loan or not meeting contractual obligations.

5 C's of Credit: What Are Banks Looking For

Credit risk is the possibility of a loss resulting from a borrower's failure to repay a loan or meet contractual obligations. Bond credit-rating agencies, such as Moody's Investors Services and Fitch Ratings, evaluate the credit risks of thousands of corporate bond issuers and municipalities on an ongoing basis.﻿﻿ ﻿﻿ For example, a risk-averse investor may opt to buy an AAA-rated municipal bond. To assess credit risk on a consumer loan, lenders look at the five Cs: credit history, capacity to repay, capital, the loan's conditions, and associated collateral. The best way for a high-risk borrower to acquire lower interest rates is to improve their credit score; those struggling to do so might want to consider working with one of the best credit repair companies. For example, because a mortgage applicant with a superior credit rating and steady income is likely to be perceived as a low credit risk, they will receive a low-interest rate on their mortgage.

Credit Risk

A cut-off score is a minimum credit score an individual may have and still receive a loan. 

Questionnaire for National Security Positions

A cut-off score is the lowest possible credit score one can have and still qualify for a loan. Other factors contributing to the credit score include the amount owed, the length of credit history, the mix of credit used, and new credit inquiries. Lenders will determine their acceptable cut-off scores, and anyone applying for a loan and having an adverse credit score, or a score below the cut-off score, is usually rejected. Typically, credit scores range from the poorest quality (300) to the highest quality (850).
The three main credit bureaus that determine credit scores are Experian, Equifax, and TransUnion. The cut-off score for credit cards and other high-interest loans will tend to be lower when compared to lower-interest credit, such as mortgages.

Cut-Off Score

The debit balance in a margin account is the amount owed by the customer to a broker for payment of money borrowed to purchase securities.

The debit balance in a margin account is the total amount of money owed by the customer to a broker or other lender for funds borrowed to purchase securities. In a margin account, the brokerage customer can borrow funds from the brokerage firm to purchase securities and pledge cash or securities already in the margin account as collateral. A cash account only uses the cash available to purchase securities, while a margin account uses borrowed money from the broker to purchase securities. The debit balance in a margin account is the total amount of money owed by the customer to a broker or other lender for funds borrowed to purchase securities. While a long margin position has a debit balance, a margin account with only short positions will show a credit balance.

Debit Balance

The default probability is the likelihood over a specified period, usually one year, that a borrower will not be able to make scheduled repayments.

Default probability is the likelihood over a specified period, usually one year, that a borrower will not be able to make scheduled repayments. In the fixed-income market, high-yield securities carry the greatest risk of default, and government bonds are at the low-risk end of the spectrum. At the other end of the spectrum are government bonds like U.S. Treasury securities, which typically pay the lowest yields and have the lowest risk of default; governments can always print more money to pay back debt. Default probability, or probability of default (PD), is the likelihood that a borrower will fail to pay back a debt. Generally, the higher the default probability, the higher the interest rate the lender will charge the borrower.

What Is a Default Probability?

Default risk is the event in which companies or individuals will be unable to make the required payments on their debt obligations.

Default risk is the risk that a lender takes on in the chance that a borrower will be unable to make the required payments on their debt obligation. To assess coverage based purely on cash transactions, the interest coverage ratio can be calculated by dividing earnings before interest, taxes, depreciation, and amortization (EBITDA) by periodic debt interest payments. Default risk is the risk that a lender takes on in the chance that a borrower won’t be able to make required debt payments. Default risk is the risk that a lender takes on in the chance that a borrower will be unable to make the required payments on their debt obligation. Default risk can be gauged using standard measurement tools, including FICO scores for consumer credit, and credit ratings for corporate and government debt issues.

Default Risk

Deficit net worth occurs when total liabilities exceed total assets.

Deficit net worth is a situation in which net liabilities are higher than net assets. If you'd like a tool to determine if you're experiencing a negative net worth you can use a net worth tracker which allows you to calculate, analyze, and record your net worth for free. Also known as negative net worth, deficit net worth can occur for a variety of reasons, but typically it arises when current or future asset values erode unexpectedly. A person who has a majority of their net worth tied up in their stock portfolio may experience a temporary deficit net worth if the market corrects and the portfolio loses a large portion of its value. Deficit net worth is a situation in which net liabilities are higher than net assets.

Deficit Net Worth

The Equal Credit Opportunity Act (ECOA) is a regulation that aims to give all legal individuals an equal opportunity to obtain loans.

“Title 15, Chapter 41, Subchapter IV: Equal Credit Opportunity.”

“Request for Information on the Equal Credit Opportunity Act and Regulation B.”

“The Bureau is taking action to build a more inclusive financial system.”

What protections do I have against credit discrimination?

“Having a problem with a financial product or service?”

Justice Department Reaches Settlement with Wells Fargo Resulting in More Than $175 Million in Relief for Homeowners to Resolve Fair Lending Claims

“Manhattan U.S. Attorney Settles Lending Discrimination Suit Against JPMorgan Chase For $53 Million.”

The Equal Credit Opportunity Act (ECOA) is a law created by the U.S. government with the aim of giving all individuals an equal opportunity to obtain loans and other types of credit from financial institutions and other lenders. It prohibits creditors and lenders from considering consumers’ race, color, national origin, sex/gender, religion, marital status, age (as long as they’re old enough to sign a contract) or their receipt of public assistance for any aspect of lending—from approving the application to setting terms of the loan, such as interest rate or fees.
The law applies to any organization that extends credit, including banks, small loan and finance companies, retail and department stores, credit card companies, and credit unions. In July 2020, the Consumer Financial Protection Bureau (CFPB), which takes the lead in supervising compliance and enforcing the ECOA, issued a Request for Information﻿﻿ soliciting public comments to identify opportunities for improving what ECOA does to ensure nondiscriminatory access to credit. “Clear standards help protect African Americans and other minorities,” stated Kathleen L. Kraninger, director of the agency, “but the CFPB must back them up with action to make sure lenders and others follow the law.”
When a borrower applies for credit, the lender may ask about some of the personal facts that are prohibited by the ECOA for use in making lending decisions. Creditors are only allowed to consider relevant financial factors—your credit score, your income, and your credit history, including your existing debt load—when considering your credit application or setting terms for the loan.
You are entitled to credit in your birth name. The ECOA covers various types of credit, including personal loans, credit cards, home loans, student loans, car loans, small business loans and loan modifications.

Equal Credit Opportunity Act (ECOA)

The Fair Credit Billing Act (FCBA) is a 1974 law that protects consumers from unfair credit billing practices. Read about the benefits of FCBA.

Table of Contents
What Is the Fair Credit Billing Act?
Understanding the Fair Credit Billing Act Requirements of the Fair Credit Billing Act
Fair Credit Billing Act (FCBA) vs. Fair Credit Reporting Act (FCRA)
Special Considerations
Fair Credit Billing Act FAQs
The Bottom Line
The Fair Credit Billing Act is a 1974 federal law designed to protect consumers from unfair credit billing practices. The Fair Credit Billing Act (FCBA) lays out consumers' rights to dispute credit card issuers' charges. Table of Contents
What Is the Fair Credit Billing Act?
Understanding the Fair Credit Billing Act The Fair Credit Billing Act is an important law designed to protect consumers from unfair billing practices.

Fair Credit Billing Act – FCBA

The Fair Debt Collection Practices Act (FDCPA) is a federal law that limits the actions of debt collectors, including how they can contact the debtor.

Fair Debt Collection Protections Act: Compliance Handbook

Debt Collection FAQs: How Can a Debt Collector Contact Me?

The Fair Debt Collection Practices Act (FDCPA) is a federal law that limits the actions of third-party debt collectors who are attempting to collect debts on behalf of another person or entity. If a collector does not have contact information for a debtor, they can call relatives, neighbors, or associates of the debtor to try to find the debtor's phone number, but they cannot reveal any information about the debt, including the fact that they are calling from a debt collection agency. If the FDCPA is violated, the debtor can sue the debt collection company as well as the individual debt collector for damages and attorney fees. The Fair Debt Collection Practices Act (FDCPA) covers when, how, and how often a third-party debt collector can contact a debtor. If you owe money to the local hardware store, for example, and the owner of the store calls you to collect that debt, that person is not a debt collector under the terms of this act.

Fair Debt Collection Practices Act (FDCPA)

A fully indexed interest rate is defined as an adjustable interest rate which is pegged at a set margin above some reference rate, such as LIBOR.

A fully indexed interest rate is a variable interest rate that is calculated by adding a margin to a specified index interest rate, such as LIBOR or the Fed Funds rate. A fully indexed interest rate is a variable interest rate that is calculated by adding a margin to a specified index interest rate, such as LIBOR or the Fed Funds rate. In a variable fully indexed interest rate product, the margin will typically remain the same throughout the life of the loan with the interest rate adjusted based on changes to the standard indexed rate. Lenders typically assign a margin to most variable rate products, and the margin is added to a specified index rate to serve as the fully indexed interest rate charged to borrowers on credit balances. A fully index rate is a variable interest rate that is set at a fixed margin above some reference interest rate.

Fully Indexed Interest Rate

A hard inquiry is a type of credit information request that includes a borrower’s full credit report and deducts points from a borrower’s credit score. 

What Is a Hard Inquiry and How Does It Affect Credit?

The Difference Between Hard and Soft Credit Checks

What Is a Good Credit Score?: Minimum Credit Scores

What Credit Score Do I Need to Buy a House?

Table of Contents
What Is a Hard Inquiry? Understanding a Hard Inquiry
Soft Inquiry
Special Considerations
A hard inquiry is a type of credit information request that includes your full credit report and deducts points from your credit score. Unlike hard inquiries, soft credit inquiries do not affect your credit score, because they don’t provide a creditor with your full credit report. Any type of hard credit inquiry will be reported on your credit report, causing a small credit score decrease. A hard inquiry requests your full credit history and credit score from a credit bureau.

Hard Inquiry

Margin debt is debt a brokerage customer takes on by trading on margin, meaning they borrow part of the initial capital to buy a stock from their broker.

Margin: Borrowing Money to Pay for Stocks

Margin debt is debt a brokerage customer takes on by trading on margin. Falling below the maintenance margin requirement triggers a margin call unless Sheila deposits $5,000 in cash to bring her margin up to 25% of the securities' $60,000 value, the broker is entitled to sell her stock (without notifying her) until her account complies with the rules. Meanwhile, the typical margin requirement is 25%, meaning that customers' equity must be above that ratio in margin accounts to prevent a margin call. When purchasing securities through a broker, investors have the option of using a cash account and covering the entire cost of the investment themselves, or using a margin account—meaning they borrow part of the initial capital from their broker. Regulation T sets the initial margin at a minimum of 50%, which means an investor can only take on margin debt of 50% of the account balance.

Margin Debt

The maximum loan-to-value ratio is the largest allowable ratio of a loan's size in relation to the dollar value of the property.

A maximum loan-to-value ratio is the largest allowable ratio of a loan's size to the dollar value of the property. In the loan approval process, the lender places a maximum allowable amount on the loan versus the property value because if the loan is too big a portion of the property value, the bank may not be able to get the entire value back in the event of a borrower default. For a home mortgage, the maximum loan-to-value ratio is typically 80%.
Higher loan-to-value ratios may require a borrower to purchase insurance to protect the lender or result in higher interest rates. A maximum loan-to-value ratio is the largest allowable ratio of a loan's size to the dollar value of the property. A maximum loan-to-value ratio is the largest allowable ratio a bank allows when comparing the size of a loan to the purchase price of a property.

Maximum Loan-To-Value Ratio

Moody's provides economic analysis software and rates securities based on assessed risk and the borrower's ability to make interest payments.

Moody's Corporation (MCO) is the holding company that owns both Moody's Investors Service, which rates fixed income debt securities, and Moody's Analytics, which provides software and research for economic analysis and risk management. Moody's Corporation (MCO) is the holding company that owns both Moody's Investors Service, which rates fixed income debt securities, and Moody's Analytics, which provides software and research for economic analysis and risk management. Moody's Corporation is an American financial services company that acts as the holding company for Moody's Investors Service and Moody's Analytics. Moody's Corporation dates back to _Moody's Manual of Industrial and Miscellaneous Securities_, which was first published by company founder John Moody in 1900. Moody's Investors Service provides investors with credit ratings, risk analysis, and research for stocks, bonds, and government entities.

Moody's

The National Foundation for Credit Counseling (NFCC) is a national network of non-profit credit counseling organizations.

The National Foundation for Credit Counseling (NFCC) is a national network of non-profit credit counseling organizations. To achieve this objective, NFCC members often recommend that their clients participate in a debt management plan (DMP), in which the client makes a single monthly payment to the NFCC member, who in turn uses those funds to repay the client’s debts.
The National Foundation for Credit Counseling (NFCC) is a membership organization representing the interests of credit counseling firms.
The NFCC provides educational resources and accreditation for its members while lobbying Congress on behalf of the industry. In order to maintain their NFCC accreditation, member firms must ensure that their staff is adequately trained and that annual audits are completed in regard to their operating and trust accounts. NFCC member firms must also provide ongoing consumer education programs while demonstrating that any funds held on behalf of clients are being regularly disbursed to those clients’ creditors on a biweekly basis. A central assumption of the DMP strategy is that the NFCC member will successfully negotiate more flexible debt repayment terms with the client’s creditors, which may or may not be true in practice.
Regrettably, some unethical credit counseling firms have been known to make unrealistic or misleading promises to their clients, placing them in an even worse financial position. She learns through the website of an NFCC-accredited credit counseling company that the firm is a non-profit that provides services such as credit score reviews, advice on how to avoid foreclosures, information on how to responsibly use products such as a reverse mortgage, guidance on student loan repayment plans, and assistance through DMPs.

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