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.

Partial claim

A loss mitigation option offered by the FHA that allows a borrower, with help from a lender, to get an interest-free loan from HUD to bring their mortgage payments up to date.

Password

A sequence of characters that allows users access to a system. Although they are supposed to be unique, experience has shown that most people's password choices are highly insecure.

Payment status

A code reflecting the previous history of the account, including an delinquencies or derogatory conditions occurring during the previous seven years (i.e., "Current", "delinquent 30", "current was 60", etc.)

Penalty for early withdrawal

The financial institution charges a penalty if a customer wants to withdraw money from a certificate of deposit before the end of the term.

Penalty rate

A higher APR charged by a credit card issuer after the customer has made late payments, exceeded their credit limit or otherwise did not abide by the cardmember agreement.

Periodic payment cap

A limit on the amount that payments can increase or decrease during any one adjustment period.

Periodic rate cap

A limit on the amount that the interest rate can increase or decrease during any one adjustment period, regardless of how high or low the index might be.

Permanent loan

A long-term mortgage, usually 10 years or more. Also called an "end loan."

Permissible purposes

Purposes for which a personal credit report may be issued to a third party. These include credit transactions, employment purposes, insurance underwriting, government financial responsibility laws, court orders, subpoenas, written instructions of the consumer, legitimate business needs, etc.

Personal loan

A loan based on your income, debt and credit history. Usually unsecured by collateral.

PITI

Principal, interest, taxes, and insurance - the four elements of a monthly mortgage payment. Payments of principal and interest go directly towards repaying the loan, while the portion that covers taxes and insurance (homeowner's and mortgage, if applicable) goes into an escrow account to cover the fees when they are due.

Point-of-sale (POS)

Location in a merchant establishment at whicha sale is consummated by payment for goods or services received.

Points (Loan discount points)

Prepaid interest assessed at closing by the lender. Each point is equal to 1 percent of the loan amount (e.g., two points on a $100,000 mortgage would cost $2,000).

Posting

The process of updating individual cardholder account balances to reflect merchandise sales, instant cash, cash advances, adjustments, payments and any other charges or credits.

Potentially negative items

Any items or public records shown on your credit report that may have an effect on your creditworthiness as viewed by your creditors.

Power of Attorney

A legal document authorizing one person to act on behalf of another.

Pre-approve

Lender commits to lend to a potential borrower. Commitment remains as long as the borrower still meets the qualification requirements at the time of purchase.

Pre-Approved

A potential customer who has passed an initial credit bureau evaluation. Not ever to be confused with "approved" or "granted".

Pre-foreclosure sale

Allows a defaulting borrower to sell the mortgaged property to satisfy the loan and avoid foreclosure.

Pre-qualify

A lender informally determines the maximum amount an individual is eligible to borrow.

Premium

An amount paid on a regular schedule by a policyholder that maintains insurance coverage.

Prepayment

Payment of the mortgage loan before the scheduled due date; may be subject to a prepayment penalty.

Primary mortgage market

Lenders, such as savings and loan associations, commercial banks and mortgage companies who make mortgage loans directly to borrowers. These lenders sometimes sell their mortgages to secondary mortgage markets, such as Fannie Mae or Ginnie Mae.

Prime Rate

The interest rate at which banks lend to their most creditworthy (prime) customers. The prime rate is known to change but not on a regular basis. It is one way that a credit card company determines APRs.

Principal

1. The amount borrowed from a lender; doesn't include interest or additional fees.
2. The outstanding balance of a loan, exclusive of interest and other charges.

Private mortgage insurance (PMI)

In the event the borrower lacks a 20% down payment, lenders will allow a smaller down payment. With this smaller down payment, however, borrowers are usually required to carry (and pay for) private mortgage insurance. Depending on the loan's structure, PMI will usually require an initial premium payment, and may require an additional monthly fee.

Public record data

Included as part of the credit report, this information is limited to tax liens, lawsuits and judgments that relate to the consumer's debt obligations.

Calculators