Credit Terms Used In Bozeman Real Estate Transactions
Have you ever wondered about the meaning of various credit terms?
Amortization:
Loan payments made during the term (period of time) of your loan. Amortization is also termed “debt reduction” because debt is reduced with each (monthly) payment.
Annual Percentage Rate (APR):
The total costs, expressed as a percentage rate, bundled into your Bozeman Montana real estate loan, including fees and finance charges.
Available Credit:
The total amount of money available to you to borrow from your lender.
Balance:
The total amount of money owed on your debt, including interest, principal, and any fees.
Bankruptcy:
A proceeding in U.S. Bankruptcy Court that may legally release a person from repaying debts owed. Credit reports normally include bankruptcies for up to 10 years.
Budget:
A list of expenses–the items and amount of money you spend (usually in a certain period of time). A budget compares these expenses to the total amount of money–income–you bring into your household.
Capacity:
Your present and future capability to pay your loan.
Charge-off:
The balance on a credit obligation that a lender no longer expects to be repaid and writes off as a bad debt.
Closed-End Loan:
A loan you receive for a specific period of time.
Closing:
The meeting you attend with your lender and realtor to sign property loan documents so that your loan funds may be disbursed to pay for your real estate.
Collateral (aka Security):
Property you pledge to your creditor that may be repossessed to help incur the debt remaining on your loan if you do not pay.
Collection:
Attempted recovery of a past-due credit obligation by a collection department or agency.
Conditional Approval:
Loan approval you receive, predicated upon you performing specific requirements.
Consumer Credit File:
A credit bureau record on a given individual. It may include: consumer name, address, Social Security number, credit history, inquiries, collection records, and public records such as bankruptcy filings and tax liens.
Co-signer:
Person with whom you apply for a loan who is equally responsible for paying the debt on your property.
Credit Application Scoring:
The use of a statistical model to objectively evaluate and “score” credit applications and credit bureau data in order to assess likely future performance. Scores help businesses make decisions such as whether to accept or decline the application.
Credit Bureau:
A credit reporting agency that is a clearinghouse for information on the credit rating of individuals or firms. Is often called a “credit repository” or a “consumer reporting agency”. The three largest credit bureaus in the U.S. are Equifax, Experian and TransUnion.
Credit Bureau Risk Score:
A type of credit score based solely on data stored at the major credit bureaus. It offers a snapshot of a consumer’s credit risk at a particular point in time, and rates the likelihood that the consumer will repay debts as agreed.
Credit History:
A record of how a consumer has repaid credit obligations in the past.
Credit Obligation:
An agreement by which a person is legally bound to pay back borrowed money or used credit.
Credit Report:
Information communicated by a credit reporting agency that bears on a consumer’s credit standing. Most credit reports include: consumer name, address, credit history, inquiries, collection records, and any public records such as bankruptcy filings and tax liens.
Credit Risk:
The likelihood that an individual will pay his or her credit obligations as agreed. Borrowers who are more likely to pay as agreed pose less risk to creditors and lenders.
Credit Score:
This term is often used to refer to credit bureau risk scores. It broadly refers to a number generated by a statistical model which is used to objectively evaluate information that pertains to making a credit decision.
Creditor:
An institution like a bank or person from whom you borrow money.
Debt:
The total amount of money owed to your creditors.
Default:
A failure to make a loan or debt payment when due. Usually an account is considered to be “in default” after being delinquent for several consecutive 30-day billing cycles.
Delinquent:
A failure to deliver even the minimum payment on a loan or debt payment on or before the time agreed. Accounts are often referred to as 30, 60, 90 or 120 days delinquent because most lenders have monthly payment cycles.
EBITDA:
Earnings Before Interest, Taxes, Depreciation, and Amortization.
Equal Credit Opportunity Act (ECOA):
Federal legislation that prohibits discrimination in credit. The ECOA originally was enacted in 1974 as Title VII of the Consumer Credit Protection Act.
Fair Credit Reporting Act (FCRA):
Federal legislation that promotes the accuracy, confidentiality and proper use of information in the files of every “consumer reporting agency”. The FCRA was enacted in 1970.
FICO® Scores:
Credit bureau risk scores produced from models developed by Fair Isaac Corporation are commonly known as FICO scores. Fair Isaac credit bureau scores are used by lenders and others to assess the credit risk of prospective borrowers or existing customers, in order to help make credit and marketing decisions. These scores are derived solely from the information available on credit bureau reports.
Finance Charge:
Amount of money paid to borrow money from your lending institution. Finance charges include insurance premiums, interest, service fees, and any other fee to which you agreed.
Gross Monthly Income:
Money you receive from your vocation prior to deductions, like taxes, insurance, etc.
Grace Period:
Period of time after your scheduled payment is due. During this time period of grace, you may incur additional finance charges.
Inquiry:
An item on a consumer’s credit report that shows that someone with a “permissible purpose” (under FCRA rules) has previously requested a copy of the consumer’s report. Fair Isaac credit bureau risk scores take into account only inquiries resulting from a consumer’s application for credit.
Installment Debt:
Debt to be paid at regular times over a specified period. Examples of installment debt include most mortgage and auto loans.
Insurance Bureau Score:
An insurance rating based solely on credit bureau data stored at the major credit bureaus. It offers a snapshot of an individual’s insurance risk at a particular point in time, and helps insurers evaluate new and renewal auto and homeowner insurance policies.
Interest Rate:
The rate of interest on your loan or mortgage.
Judgment:
This is a legal order stating you owe money. In many states, your wages may be garnished or funds withdrawn from your bank account(s) after the judgment date.
Late Fee:
The amount of money charged for payment(s) made after a due date or grace period.
Late Payment:
A delinquent payment; a failure to deliver a loan or debt payment on or before the time agreed, usually the due date or grace period.
Lien:
Claim made on your property. Your Bozeman, Montana property could be repossessed if you fail to pay according to the terms agreed upon in your loan.
Net Income:
Amount of money you receive in your paycheck after all deductions, like taxes, are made.
Principal:
The amount of money you owe, not including interest and fees.
Revolving Debt:
Debt owed on an account that the borrower can repeatedly use and pay back without having to reapply every time credit is used. Credit cards are the most common type of revolving account.
Scoring Model:
A statistical formula that is used, usually with the help of computers, to estimate future performance of prospective borrowers and existing customers. A scoring model calculates scores based on data such as information on a consumer’s credit report.
Term:
The length of time from the beginning of your loan until full payment is achieved.
Title:
A legal document proving you own your Montana property.
Unsecured Loan:
Loan in which you do not offer your home, vehicles, household goods, etc. as collateral.
