Glossary of Terms
Credit Glossary
It's hard enough trying to stay on top of your credit let alone learn the industry lingo. We've compiled a glossary of industry terms to help you stay ahead of the curve when dealing with your credit, auto loans, home loans, debt, and savings.
- Cap
- Consumer safeguard, such as that placed on an adjustable rate mortgage, which limits the amount a monthly payment or interest rate can increase or decrease.
- Capacity
- Factor in determining creditworthiness. Capacity is assessed by weighing a borrower's earning ability and the likelihood of continuing income against the amount of debt the borrower carries at the time the application for credit is made. While capacity may be considered in a credit decision, the credit report does not contain information about earning ability or the likelihood of continuing income.
- Cardholder
- An individual to whom a credit card is issued, or who is authorized to use a specific card.
- Card issuer
- Any association member financial institution, bank, credit union or company that issues, or causes to be issued, credit and/or debit cards to cardholders.
- Cardmember agreement
- A written document that provides details of your agreement with the credit card issuer.
- Card reader
- A device that is capable of reading the encoding on plastic credit/debit cards.
- Cash advance
- Using your credit card to get cash from a bank, ATM, or by writing a convenience check. Typically, the card issuer charges a cash advance fee for the transaction and begins charging interest immediately.
- Cash flow
- The amount of cash derived over a certain period of time from an income-producing property. The cash flow should be large enough to pay the expenses of that property.
- Cash reserve
- A cash amount sometimes required to be held in reserve in addition to the down payment and closing costs; the amount is determined by the lender.
- Certificate of deposit
- A deposit account that pays higher interest than a regular savings account in exchange for a commitment to keep the money deposited for a specific period of time.
- Certificate of Eligibility
- The document given to qualified veterans which entitles them to Veterans Administration-guaranteed loans for homes, businesses and mobile homes. Certificates of eligibility may be obtained from the local VA office by sending DD-214 (Separation Paper) with VA Form 1880 (request for Certificate of Eligibility).
- Certificate of Reasonable Value
- An appraisal issued by the VA showing a property's current market value.
- Certificate of title
- A document provided by a qualified source (such as a title company) that shows the property legally belongs to the current owner. Before the title is transferred at closing, it should be free and clear of all liens or other claims.Clear Title
- A title that is free of liens.
- Chargeback
- A transaction returned through interchange by an issuer to an acquirer. A transaction may be returned if it was non-compliant with the association rules and regulations, or because it was disputed by a cardholder.
- Chargeback period
- The number of days from the transaction's processing date or endorsement date, during which the issuer may initiate a chargeback.
- Charge card
- A specific kind of card that requires full payment of your balance with each billing cycle. Typically charge cards do not charge interest, but late fees can apply if full payment is not received by the due date.
- Charge-off
- Action of transferring accounts deemed uncollectible to a category such as bad debt or loss.
- Clear
- When a check (or electronic payment) has been deducted from the payer's account and credited to the payee's account.
- Closed date
- The date an account was closed.
- Closing
- Also known as settlement, this is the time at which the property is formally sold and transferred from the seller to the buyer. It is at this time that the borrower takes on the loan obligation, pays all closing costs and receives title from the seller.
- Closing (or "settlement") costs
- Customary costs over and above the sale price of the property incurred by buyers and sellers when transferring ownership of a property. Normally include an origination fee, property taxes, survey, deed recording fee, credit report charge, charges for title search and insurance, escrow costs, appraisal fees and other costs assessed at settlement. Closing costs will vary by the area of the country and the lenders used, but usually range between 3 and 6 percent of the mortgage amount.
- Co-branded Card
- A co-branded credit card is sponsored both by the issuing bank and a business organization, such as an airline or a department store. Cardholders may get benefits, such as discounts or frequent flyer miles, from the sponsoring merhcnat, based on account usage and terms.
- Collection account
- An account owed to a creditor which has been transferred to a creditor's collections department or to a separate professional debt collection agency.
- Collateral
- Security pledged for the payment of a loan. Failure to repay the loan means loss of the collateral.
- Co-maker
- A creditworthy co-maker is sometimes required in situations where an applicant's qualifications are marginal. A co-maker is legally responsible to repay the charges in the joint account agreement.
- Commission
- An amount, usually a percentage of the property's selling price, collected by a real estate professional as a fee for negotiating the transaction.
- Compound interest
- Interest calculated not just on the original principal, but also on the interest already accrued.
- Condominium
- A form of ownership in which individuals purchase and own a unit of housing in a multi-unit complex. The owner also shares financial responsibility for common areas.
- Consolidated Omnibus Budget Reconciliation Act (COBRA)
- Federal legislation requiring businesses of a certain size to keep former employees and their dependents on the group health plan for a limited period of time, provided the ex-employee pays the premiums.
- Consumer Credit Counseling Service
- A non-profit organization that assists consumers in dealing with their credit problems. Consumer Credit Counseling Service has offices throughout the United States that can be located by calling 800 388 CCCS (2227).
- Consumer Reporting Company (or Credit Bureau)
- An organization that collects personal financial and other information on consumers, and handles the preparation of reports used by lenders to determine a potential borrower's credit history.
- Contingency
- A specified condition that must be met before a contract is legally binding. The two most common contingencies in home purchasing are 1) the house must pass the home inspection, and 2) the borrower must get the loan.
- Contract sale or deed
- A contract between a buyer and a seller which conveys (transfers) title after certain conditions have been met. A form of installment sale.
- Conventional loan
- A private sector loan, one that is not guaranteed or insured by the U.S. government.
- Conversion Clause
- A provision in an ARM allowing the loan to be converted to fixed-rate at some point during the term. Conversion is usually allowed at the end of the first adjustment period. The conversion feature may cost extra.
- Cooperative (Co-op)
- Residents purchase stock in a cooperative corporation that owns a structure. Each stockholder is then entitled to live in a specific unit of the structure and is responsible for paying a portion of the loan.
- Co-signer
- Person who pledges in writing as part of a credit contract to repay the debt if the borrower fails to do so. The account displays on both the borrower's and the co-signer's credit reports.
- Credit limit
- The maximum amount that you can charge on your credit card.
- Credit history
- History of an individual's debt payment and other financial information. Lenders use this information to gauge a potential borrower's ability to repay a loan.
- Credit items
- Information reported by current or past creditors.
- Credit limit/Line of credit
- In open-end credit (like a credit card), the maximum amount a borrower can draw upon, or the maximum that an account can show as outstanding.
- Credit report
- A report about your credit history that lenders (credit card companies, mortgage companies, loan agents, etc.) consult to determine if and how much money they should lend to you. Your history for making timely payments, any outstanding debt and open lines of credit are all shown on your credit report. Your credit report is available from credit bureaus such as Equifax, Experian and TransUnion.
- Credit Risk Score
- A statistical summary of the information contained in a consumer's credit report. The most well known type of credit risk score is the Fair Isaac (or FICO) score. This form of credit scoring is a mathematical summary calculation that assigns numerical values to various pieces of information in the credit report. The overall credit risk score is a major part of the information used in the credit underwriting process for a mortgage loan.
- Creditor
- A person or firm to whom money is due.
- Credit scoring
- Tool used by credit grantors to provide an objective means of determining risks in granting credit. Credit scoring criteria is set by the credit grantor.
- Creditworthiness
- The ability of a consumer to receive favorable consideration and approval for the use of credit from an establishment to which they applied.
- Custodial account
- A savings account that is owned by a child but controlled by an adult until the child reaches legal age.
