Credit Glossary
- Charge Off - means that a creditor has decided to treat an account receivable (or debt) as a loss because payment is unlikely. Basically the creditor will charge off a debt when it has given up in collecting a debt. A creditor usually sells a charged off debt to a third-party collection agency to recoup some of its loss. This results in both the original creditor and the collection agency reporting negative items on a person's credit report.
- Default - the failure to pay a debt when due, or honor a contractual obligation.
- Default Judgment - a judgment entered against a defendant who has failed to plead or otherwise defend himself against a creditor's lawsuit.
- FCRA - Fair Credit Reporting Act. These laws govern credit reporting.
- FDCPA - Fair Debt Collection Practices Act. These laws govern collection agencies in the collection of debt.
- Collection Account – This is when a debt is charged off and then sold by a creditor to a collection agency who then pursues the individual responsible to try and recover all or a portion of the debt.
- Collection Agency – This is a company that purchases “charge offs” or unpaid debts that a creditor has given up on recovering from the consumer.
- Credit Dispute – A credit dispute occurs when a consumer files a dispute letter to a credit bureau in an attempt to get an item in question removed. A dispute usually involves challenging the accuracy / validity of an account.
- Credit Bureau – This is an agency responsible for storing, managing and processing consumer credit history, credit items, and supplying credit reports. Experian, Equifax and TransUnion are the three main agencies.
- Credit Repair – Credit repair is the act of fixing ones credit. You can repair your credit yourself by filing disputes or by hiring a credit repair firm to do so for you.
- Good Standing – This means that your credit it either “good” or above average and/or “qualified”.
- Bankruptcy – A bankruptcy occurs when a consumer can no longer make payments on their debts, so they then file a bankruptcy has a method for federal protection from their creditors. When you file a bankruptcy any items marked as collateral will be confiscated in attempt to recover some of your debt. A bankruptcy will either eliminate or reduce the debt you owe your creditors. However, a bankruptcy can remain on your credit report for 7, up to 10 years which will hurt your credit score.
- Repossession – Repossession occurs when an individual takes out a loan for an item and cannot make the minimum payments for the loan. The item that was purchased with the loan is then confiscated by the owner and often times sold in auctions to recover back lost profits. Repossession is very damaging to your credit score and can stay on your report for up 7 – 10 years.
- Tax Lien – You can get a tax lien on your credit report if you do not pay taxes on a piece of property that you own or are associated with. A tax lien is a huge credit killer and damages your score significantly.
- Foreclosure – A foreclosure happens when you are unable to make the mortgage payments for your house. After a prolonged period of absent payments you will receive an eviction letter in the mail marked with a date that you must be out of the house or face legal action. Foreclosure are another huge credit killer on your report.
- Civil claims – A civil claim is a judgment filed against you for either an unpaid debt or a circumstance in which you failed to make payments to a creditor. These drop your score by quite a few points.
- Judgments – A judgment is a court ruling that is listed on your credit report, if you received the judgment it was most likely in response to not paying or defaulting on a loan or type of credit being borrowed. These impact your credit very negatively.
- Late payments – A late payment occurs when a consumer does not pay a debt back by the agreed date under contract. These will knock quite a few points of your credit score.
- Garnishments – A garnishment is a forced withdrawal of funds from your paycheck (up to 25%) that a creditor can collect to pay off your debts. A garnishment is a court ruling and is very damaging to your credit.