Money Management Glossary: Credit Management Terms
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- Bankruptcy
- Bankruptcy is a federal court proceeding in which a debtor is allowed to relieve his/her debts by transferring the assets to a trustee. Bankruptcy provision is designed to provide a fresh start to a debtor who owes more than his or her assets can satisfy.
- Chapter 11
- Officially called Reorganization Bankruptcy, Chapter 11 bankruptcy protection is usually availed by businesses that wish to continue operating and repaying their creditors concurrently through a court-approved reorganization plan.
- Chapter 13
- Chapter 13 (Officially called Adjustment of Debts) bankruptcy allows an individual debtor with Regular Income to adhere to a (court approved) plan to repay creditors over time (usually three to five years) while keeping his/her valuable assets such as a house or land.
- Chapter 7
- The most common type of bankruptcy (often called Liquidation) involves the appointment of a trustee who collects and sells any non-exempt property owned by the debtor and then distributes the proceeds to the creditors.
- Cash Reserves
- Cash Reserves quantifies the amount in cash remaining after a purchase is complete -for example, after making a down payment, or paying down the closing costs, etc.
- Credit Agency
- A Credit Agency (or a Credit Repository) is an organization that collects, records, maintains, and stores financial and public records information about the payment records (payment history) of individuals.
- Credit History
- Credit history is a measure (based on historical data) of the financial worthiness of a borrower. It provides the lenders (financial institutions and private lenders) information on whether or not the borrower has met his/her financial obligations on time in the past.
- Credit Limit
- Credit Limit quantifies the total amount of money that a borrower/applicant is approved to use on his/her credit card or line of credit (LoC).
- Credit Rating
- The phrase "Credit Rating" denotes a record of your financial reputation (credit worthiness) or your financial history. Credit Rating is used lending institutions (banks) to determine your ability to repay a loan, to use a credit card, or a Line of Credit.
- Credit Report
- A Credit Report provides historical information on a loan applicant's willingness and ability to make timely payments. Credit reports are provided to the lenders (banks, private lenders, etc. by an outside agency often known as credit bureau.
- Debt-to-Income Ratio
- Debt-to-Income Ratio (the ratio of a loan applicant's monthly debt payments to his/her monthly gross income) is one of the measures that lenders use to determine the amount of money they may lend to a potential borrower.
- Delinquency
- The term "Delinquency" denotes the failure (on the part of a borrower) to make re-payments on a loan (such as a real estate mortgage loan) when such payments are due.
- ECOA
- ECOA (Equal Credit Opportunity Act -a federal statute) makes it illegal for creditors to discriminate on the basis of age, color, marital status, national origin, race, receipt of public assistance, religion, sex, or the exercise of rights under the Consumer Protection Act by an applicant.