Credit & debt glossary

A–C

• APR (Annual Percentage Rate) — the yearly interest rate on a loan or credit card, not including compounding.
• Authorized user — someone added to another person's credit card account. Inherits that account's credit history.
• Balance transfer — moving a credit card balance to another card, usually to take advantage of a lower rate.
• Bankruptcy — a legal process that eliminates or restructures unmanageable debt. Chapter 7 (liquidation) and Chapter 13 (repayment plan) are the two main types.
• Collections — when a creditor sells your unpaid debt to a third-party agency that attempts to collect it.
• Credit bureau — a company (Equifax, Experian, TransUnion) that collects and reports your credit history.
• Credit freeze — a block on your credit file that prevents new creditors from pulling your report. Free and powerful.
• Credit limit — the maximum balance a credit card issuer allows you to carry.
• Credit utilization — the percentage of available credit you're using. Lower is better for your score.

D–M

• Debt consolidation — combining multiple debts into a single loan, ideally at a lower interest rate.
• Delinquency — a payment that's past due. Reported to credit bureaus after 30 days late.
• FICO score — the most widely used credit score, ranging from 300 to 850.
• Grace period — the time between a credit card statement date and payment due date, during which no interest accrues on new purchases (if you pay in full).
• Hard inquiry — a credit check by a lender when you apply for credit. Can lower your score by a few points temporarily.
• Minimum payment — the smallest amount your credit card company will accept each month. Paying only this leads to decades of interest.

P–Z

• PMI (Private Mortgage Insurance) — insurance required by lenders when you put less than 20% down on a home. Protects the lender, not you.
• Principal — the original amount borrowed, excluding interest.
• Revolving credit — credit that renews as you pay it off (credit cards). Contrast with installment credit (auto loans).
• Secured credit card — a credit card backed by a cash deposit. Used to build or rebuild credit.
• Soft inquiry — a credit check that doesn't affect your score. Includes checking your own credit.
• Statute of limitations — the time window during which a creditor can sue you to collect a debt. Varies by state.
• Utilization ratio — same as credit utilization. The percentage of available credit currently in use.