Credit & FICO® Score Glossary

A mortgage with an interest rate that changes periodically based on a market index after an initial fixed-rate period. ARMs typically have lower initial rates than fixed-rate mortgages. Rate adjustments can cause monthly payments to increase significantly.

The FICO score factor that accounts for 30% of your score, covering how much you owe across all accounts. Includes your credit utilization ratio (revolving credit) and how much you've paid down on installment loans relative to the original balance.

A yearly charge for holding a credit card, regardless of use. Premium rewards cards (with travel benefits, cash back, etc.) often charge annual fees ranging from $95 to $550+. Secured credit cards sometimes charge annual fees. Calculate whether the card's benefits exceed the fee before applying.

The yearly cost of borrowing money, expressed as a percentage. APR includes interest plus certain fees, giving you a more complete picture of a loan's cost than the interest rate alone. For credit cards, the APR is the interest rate charged on balances carried month-to-month.

The only website officially authorized under federal law (the FCRA and the FACT Act) to provide free credit reports from Experian, TransUnion, and Equifax. Consumers are entitled to one free report from each bureau weekly. Do not confuse with other websites that claim to offer free credit reports.

A person added to someone else's credit card account who can use the card but is not legally responsible for the debt. The primary cardholder's account history appears on the authorized user's credit report, which can improve the authorized user's score without them taking on legal liability.

An installment loan used to finance the purchase of a vehicle, where the vehicle serves as collateral. If you fail to make payments, the lender can repossess the vehicle. Auto loan interest rates are partly determined by your credit score.

The average age of all open credit accounts on your credit report. Part of the length of credit history factor (15% of FICO score). Opening new accounts and closing old ones both lower your average account age, which can hurt your score.

Moving debt from one credit card to another, typically to take advantage of a lower interest rate or 0% APR promotional period. Balance transfer cards often charge a fee (usually 3–5% of the transferred amount). Completing a transfer can help pay down high-interest debt faster.

A legal process through which individuals or businesses declare they cannot repay their debts. Chapter 7 bankruptcy (liquidation) stays on your credit report for 10 years. Chapter 13 bankruptcy (repayment plan) stays for 7 years. Bankruptcy can cause FICO score drops of 100–200 points but allows for a fresh start.

The recurring period (usually 28–31 days) between credit card statements. Your billing cycle determines when your statement is generated and what balance is reported to the credit bureaus. Payments made during the billing cycle reduce your balance; the amount remaining on the statement date is what gets reported.

A credit card reward where you earn a percentage of your spending back as cash (typically 1–5%). Cash back is the simplest rewards structure with no points conversion required. Most effective when the balance is paid in full each month to avoid interest charges that negate the cash back value.

The Consumer Financial Protection Bureau — a US government agency created by the Dodd-Frank Act in 2010 to protect consumers in the financial marketplace. The CFPB regulates consumer financial products, supervises financial institutions, enforces consumer protection laws, and accepts consumer complaints.

A form of bankruptcy that involves a 3–5 year repayment plan rather than liquidation of assets. Allows you to keep property (like a home) while catching up on overdue payments. Chapter 13 remains on your credit report for 7 years from the filing date.

A form of bankruptcy that discharges most unsecured debts (credit cards, medical bills, personal loans) within a few months. Also called liquidation bankruptcy. Chapter 7 remains on your credit report for 10 years from the filing date. You must pass a means test to qualify.

When a creditor writes off a debt as a loss after it becomes severely delinquent (typically after 180 days of non-payment). A charge-off doesn't erase the debt — you still legally owe it — but it signals to the credit bureaus and future lenders that you defaulted. Charge-offs remain on your credit report for seven years.

A specialty consumer reporting agency that tracks negative banking history — including bounced checks, unpaid bank fees, and account closures due to fraud or misuse. Used by approximately 80% of US banks when evaluating checking account applications. Regulated by the FCRA; you can request a free report annually.

A credit account that is no longer active. Closed accounts in good standing (with a positive history) remain on your credit report for up to 10 years and continue to benefit your score during that time. Closed accounts with negative history remain for 7 years.

A person who signs a loan application along with the primary borrower, agreeing to be equally responsible for repaying the debt if the primary borrower defaults. Both the borrower's and co-signer's credit reports and scores are affected by the account's payment history.

An asset pledged to secure a loan. If the borrower defaults, the lender can seize and sell the collateral to recover the unpaid debt. A house is collateral for a mortgage; a vehicle is collateral for an auto loan. Secured loans typically have lower interest rates because of this protection.

When a creditor turns an overdue debt over to a collection agency after the borrower fails to pay. Collection accounts are reported to credit bureaus and remain for seven years from the original delinquency date. Paying a collection removes your legal obligation but typically doesn't remove the account from your report.

Any business that compiles and sells reports about consumers to creditors, employers, landlords, or others. Includes the three major credit bureaus plus dozens of specialty agencies covering banking, insurance, employment, tenant screening, and more. All CRAs are regulated by the Fair Credit Reporting Act.

A mortgage not insured by the federal government, following guidelines set by Fannie Mae and Freddie Mac. Requires a minimum credit score of 620. Offers better interest rates than FHA for borrowers with good credit, and private mortgage insurance (PMI) can be removed once you reach 20% equity.

A loan where a second person (the co-signer) agrees to take equal legal responsibility for repayment. If the primary borrower misses payments, the co-signer's credit is damaged and they become liable for the debt. Cosigned loans appear on both the primary borrower's and the co-signer's credit reports.

A type of loan designed to help people with no or poor credit build a positive payment history. The borrowed money is held in a savings account while you make monthly payments. When the loan is paid off, you receive the funds and have a track record of on-time payments on your credit report.

A company that collects and maintains credit information about consumers and provides credit reports to lenders, creditors, and consumers. The three major US credit bureaus are Experian, TransUnion, and Equifax. Also called Consumer Reporting Agencies (CRAs) under the Fair Credit Reporting Act.

The contract between you and your credit card issuer that outlines the terms of your account, including interest rates, fees, grace period, and cardholder rights. Federal law requires issuers to provide a Schumer Box — a standardized table of key terms — making it easier to compare cards.

A formal challenge to information on your credit report that you believe is inaccurate, incomplete, or unverifiable. Under the FCRA, credit bureaus must investigate disputes within 30 days and correct or remove items they cannot verify.

A free security measure that prevents creditors from accessing your credit report to open new accounts. Also called a security freeze. Freezes are placed at each bureau separately and remain in effect until you lift them. Does not affect your credit score or existing accounts.

Any access to your credit report by an authorized party. Credit inquiries are classified as hard inquiries (when you apply for credit — impacts your score) or soft inquiries (such as your own checks or pre-approval screening — no score impact).

A consumer who has no credit history with any of the three major bureaus, making it impossible for scoring models to generate a credit score. An estimated 26 million Americans are credit invisible, according to the CFPB.

The maximum amount a lender allows you to borrow on a revolving credit account (credit card or line of credit). Exceeding your credit limit can result in fees and score damage. Higher credit limits (with low balances) improve your credit utilization ratio.

The FICO score factor that accounts for 10% of your score. Reflects whether you have experience managing different types of credit — revolving credit (credit cards) and installment credit (loans). Having both types generally helps your score, though it's not necessary to open accounts you don't need.

A service that alerts you to changes in your credit report, such as new accounts, hard inquiries, or changes in account status. Helps detect identity theft and errors early. Available for free (through card issuers and monitoring services) and paid (through bureaus and third-party services).

The process of improving a damaged credit profile by disputing inaccurate information, paying down debts, and building positive credit habits. Legitimate credit repair involves disputing errors under the FCRA. Credit repair companies cannot legally remove accurate, timely negative information.

A detailed record of your credit history maintained by each of the three major credit bureaus (Experian, TransUnion, Equifax). Contains personal information, account history, payment records, public records, and credit inquiries.

A numerical representation of your creditworthiness, typically ranging from 300 to 850. Credit scores are calculated by scoring models (like FICO or VantageScore) using data from your credit report. Lenders use credit scores to assess the risk of lending money.

The classification system that groups FICO scores into categories. Poor: 300–579. Fair: 580–669. Good: 670–739. Very Good: 740–799. Exceptional: 800–850. These ranges are used by lenders to set interest rates and determine eligibility for credit products.

The percentage of your available revolving credit (credit cards, lines of credit) that you're currently using. Calculated by dividing your total credit card balances by your total credit limits. Accounts for 30% of your FICO score. Lower is generally better; keeping utilization below 30% is a common guideline, while below 10% is ideal.

See Credit Utilization. The percentage of your available revolving credit you're currently using. Calculated as total revolving balances divided by total revolving credit limits. Accounts for 30% of your FICO score.

A person or company hired to collect debts owed to creditors. Third-party debt collectors are regulated by the Fair Debt Collection Practices Act (FDCPA), which prohibits abusive, unfair, or deceptive practices in debt collection.

Combining multiple debts into a single loan or payment, typically to get a lower interest rate, simplify payments, or pay off debt faster. Common methods include personal loans, balance transfer credit cards, and home equity loans.

An arrangement where you negotiate with a creditor to pay less than the full amount owed in exchange for canceling the debt. Settled accounts may still appear on your credit report as 'settled for less than the full amount,' which is negative. The forgiven debt may also be taxable as income.

A measure of how much of your monthly gross income goes toward debt payments. Calculated by dividing your total monthly debt payments by your gross monthly income. Lenders use DTI to assess your ability to repay new debt. Most conventional mortgage lenders prefer a DTI below 43%.

Failure to repay a debt according to the terms of the loan agreement. Default triggers consequences depending on the loan type — collections activity, repossession, foreclosure, or wage garnishment. Defaulting on any loan severely damages your credit score.

Failure to make a payment by its due date. A 30-day delinquency means you're 30 or more days past due. Delinquencies are reported to credit bureaus and can significantly lower your FICO score. The date of first delinquency starts the clock on the 7-year reporting period for negative items.

Any negative information on your credit report that signals to lenders that you've had difficulty repaying debts. Derogatory marks include late payments, collections, charge-offs, foreclosures, bankruptcies, and judgments. Most derogatory marks stay on your report for seven years.

The legal elimination of a debt through bankruptcy. A bankruptcy discharge releases you from personal liability for the debt — you no longer legally owe it and creditors cannot attempt to collect. Not all debts can be discharged (student loans and child support are generally non-dischargeable).

A written request to a credit bureau or data furnisher asking them to investigate and correct or remove inaccurate information on your credit report. The FCRA gives you the right to dispute, and bureaus must investigate within 30 days. The CFPB provides free dispute letter templates.

The upfront cash amount paid at the time of purchasing a home or vehicle, representing the portion of the purchase price not financed by a loan. A larger down payment reduces your loan amount and may help you avoid private mortgage insurance (PMI) on conventional loans.

A specialty consumer reporting agency owned by major US banks (including JPMorgan Chase, Bank of America, and Wells Fargo). Tracks bank account abuse, fraud, and other negative banking activity. Also operates the Zelle payment network. Regulated by the FCRA.

One of the three major US credit bureaus. Equifax collects and maintains credit data for consumers and businesses, providing credit reports, scores, and analytics. Headquartered in Atlanta, Georgia.

A FICO score of 800–850. Qualifies for the best available interest rates, highest credit limits, and most credit products. Only about 21% of consumers have a FICO score in this range (Experian, 2024). Requires a long history of on-time payments, very low utilization, and minimal new credit.

One of the three major US credit bureaus. Experian collects and maintains credit data for approximately 235 million US consumers and provides credit reports, scores, and monitoring services. Headquartered in Dublin, Ireland with US operations in Allen, Texas.

A FICO score of 580–669. Credit products are available in this range but often at higher interest rates and with stricter terms. Sometimes called 'subprime.' Building positive credit history can move a score from fair to good within 12–24 months.

The US federal law that regulates how credit bureaus (Consumer Reporting Agencies) collect, use, and share your credit information. The FCRA gives you the right to see your credit report, dispute inaccuracies, and limits how long negative information can remain on your report.

US federal law that regulates how third-party debt collectors can contact you and collect debts. Prohibits harassment, false statements, and unfair practices. Gives you the right to request debt validation and cease communication from collectors.

A mortgage insured by the Federal Housing Administration (FHA), allowing borrowers with credit scores as low as 580 to qualify with a 3.5% down payment (or 500 with 10% down). FHA loans require mortgage insurance premiums (MIP). Popular with first-time homebuyers.

A three-digit number ranging from 300 to 850 that represents your creditworthiness, calculated by the Fair Isaac Corporation (FICO) using data from your credit report. Used by 90% of top US lenders to evaluate loan and credit card applications.

The most widely used version of the FICO scoring model, released in 2009. FICO 8 is the standard used by most credit card companies and many lenders. It places more emphasis on high credit card utilization (above 30% per card) and is more forgiving of isolated late payments.

A FICO scoring model released in 2014. FICO 9 excludes paid collection accounts entirely and reduces the weight of medical collection accounts in the score calculation. Not yet as widely used as FICO 8, but some lenders have adopted it.

A mortgage where the interest rate remains constant for the life of the loan, resulting in predictable monthly payments. 30-year and 15-year fixed-rate mortgages are the most common in the US. Offers stability and protection against rising interest rates.

The legal process by which a lender takes possession of a home when the borrower fails to make mortgage payments. Foreclosure typically causes a FICO score drop of 100–160 points and remains on your credit report for seven years from the date of the first missed payment.

A notice placed on your credit report asking lenders to take extra steps to verify your identity before extending new credit. Lasts one year (or seven years for identity theft victims). Unlike a credit freeze, you only need to file a fraud alert with one bureau — it notifies the others automatically.

A FICO score of 670–739. Considered good by most lenders, offering access to most credit products at competitive (though not always best) rates. Approximately 21% of US consumers score in this range (Experian, 2024).

A request asking a creditor or lender to remove an accurate negative item from your credit report as a courtesy. There is no FCRA requirement for creditors to honor goodwill deletion requests, but some lenders will remove a late payment for a long-standing customer with an otherwise clean record.

The time between the end of a billing cycle and the payment due date during which you can pay your full balance without being charged interest. Most credit cards offer a grace period of 21–25 days. If you carry a balance from one month to the next, the grace period is typically eliminated.

A credit check that occurs when you apply for new credit — a credit card, loan, mortgage, or auto financing. Hard inquiries may lower your FICO score by a few points (typically fewer than 5) and remain on your credit report for two years. Also called a 'hard pull.'

A revolving line of credit secured by the equity in your home. Functions like a credit card in that you can borrow, repay, and borrow again up to your limit. HELOCs count toward your revolving credit utilization calculation. Interest is usually variable.

When someone uses your personal information (Social Security number, credit card number, name and address) to commit fraud, typically opening accounts or taking out loans in your name. Identity theft can severely damage your credit and requires filing disputes with the credit bureaus and reporting to the FTC.

A loan repaid in fixed monthly payments (installments) over a set period of time. Examples include mortgages, auto loans, student loans, and personal loans. Unlike revolving credit, installment loans have a fixed balance that decreases with each payment.

The percentage charged by a lender for borrowing money, expressed annually. The interest rate is the base cost of borrowing. APR (Annual Percentage Rate) is a broader measure that includes fees in addition to the interest rate.

A loan where payments initially cover only the interest, not the principal balance. After the interest-only period (typically 5–10 years), payments increase to cover both principal and interest. Monthly payments are lower initially but the balance doesn't decrease until the principal repayment period begins.

A court ruling that legally confirms you owe a debt to a creditor. Judgments can appear on your credit report and allow creditors to pursue wage garnishment or bank levies to collect. Civil judgments were largely removed from credit reports in 2017–2018 by the three major bureaus, but some state records may still appear.

A payment not received by the due date. Payments 30 or more days past due are reported to credit bureaus and can significantly lower your FICO score. The later the payment (30, 60, 90+ days), the greater the negative impact. Late payments remain on your credit report for seven years.

The FICO score factor that accounts for 15% of your score. Considers the age of your oldest account, the age of your newest account, and the average age of all accounts. Longer credit history generally improves this factor.

The Comprehensive Loss Underwriting Exchange — a specialty consumer reporting database maintained by LexisNexis. Contains up to seven years of auto and homeowner insurance claims history. Insurers use C.L.U.E. reports to help set premiums. Consumers can request a free report annually under the FCRA.

The smallest amount you can pay on a credit card bill each month without incurring a late fee. Paying only the minimum keeps you current but extends your repayment period dramatically and results in paying significant interest over time. Always more effective to pay the full balance or as much as possible.

A loan used to purchase or refinance real estate, where the property serves as collateral. Mortgages are installment loans with terms typically ranging from 10 to 30 years. Missing mortgage payments can lead to foreclosure. Minimum credit scores vary by loan type (FHA: 500, conventional: 620).

The mortgage insurance required on FHA loans, protecting the lender against default. MIP includes an upfront premium (typically 1.75% of the loan amount) and an annual premium paid monthly. Unlike PMI on conventional loans, FHA MIP often lasts the life of the loan if you put down less than 10%.

The FICO score factor that accounts for 10% of your score. Covers recent credit applications (hard inquiries) and newly opened accounts. Opening several new accounts in a short period can lower your score.

A payment made by or before the due date. Consistent on-time payments are the single most important action you can take to build and maintain a strong credit score. Payment history is 35% of your FICO score. Accounts that never report a late payment build strong positive history over time.

An agreement where a debt collector agrees to remove a collection account from your credit report in exchange for payment. Not guaranteed and not universally accepted. The FCRA allows accurate information to be reported, so collectors are not required to delete accurate entries. The original creditor almost never agrees to pay-for-delete.

The most heavily weighted factor in your FICO score, accounting for 35% of the calculation. Reflects whether you've paid your bills on time. Late payments, collections, bankruptcies, and charge-offs all negatively affect this factor.

An unsecured installment loan used for various purposes (debt consolidation, home improvement, emergencies). Approved based on your creditworthiness with no collateral required. Interest rates depend heavily on your credit score.

The practice of becoming an authorized user on another person's credit card to benefit from their positive account history. While legitimate when done with family members or trusted individuals, paid tradeline arrangements (stranger's accounts rented for a fee) are controversial and may be less effective with current FICO models.

A FICO score of 300–579. Most mainstream credit products are unavailable or very expensive in this range. Secured credit cards and credit-builder loans are common starting points for rebuilding. About 16% of US consumers have a score in this range (Experian, 2024).

A more thorough credit evaluation than pre-qualification, typically involving a hard credit pull and verification of income. For mortgages, a pre-approval letter indicates a lender's willingness to lend up to a specific amount, though final approval still depends on property appraisal and underwriting.

A lender's estimate of whether you might qualify for a loan or credit card, based on a soft credit pull and self-reported financial information. Pre-qualification does not affect your credit score and does not guarantee approval. Also called pre-approval in some contexts.

The original amount borrowed on a loan, not including interest or fees. Each loan payment typically covers interest first, with any remaining amount applied to the principal. Paying extra toward the principal reduces the loan balance faster and results in less interest paid overall.

Insurance that protects the lender (not you) if you default on a conventional mortgage with less than 20% down. PMI adds to your monthly payment and can be removed once you reach 20% equity. FHA loans have their own version called mortgage insurance premiums (MIP).

The practice of comparing loan terms from multiple lenders to find the best interest rate. FICO accounts for rate shopping by counting multiple mortgage, auto, or student loan inquiries within a 14–45 day window as a single inquiry. This protection does not apply to credit card applications.

A service that reports your on-time rent payments to one or more credit bureaus, helping you build positive payment history without a traditional credit card or loan. Experian RentBureau, Rental Kharma, and similar services offer rent reporting for a fee. Some landlords report directly.

When a lender reclaims a financed asset (typically a vehicle) after the borrower defaults on loan payments. The lender then sells the asset to recover the debt. Repossession remains on your credit report for seven years and significantly damages your credit score.

A type of credit where you can borrow repeatedly up to a set limit, repay, and borrow again. Credit cards and lines of credit are revolving. Your credit utilization ratio — a major FICO factor — only applies to revolving credit accounts.

A credit card that offers points, miles, or cash back on purchases. Rewards cards typically require good to excellent credit (670+). The value of rewards is only realized if you pay your balance in full each month — interest charges will quickly outweigh any rewards earned on a carried balance.

A credit card that requires a cash deposit as collateral. The deposit typically equals your credit limit. Secured cards are designed for people with no credit or poor credit and report to the credit bureaus just like regular cards, making them effective credit-building tools.

Debt backed by collateral — an asset the lender can take if you default. Mortgages (collateral: home) and auto loans (collateral: vehicle) are secured debts. Because the lender has recourse to the collateral, secured loans typically have lower interest rates than unsecured debt.

A credit check that does not affect your FICO score. Soft inquiries occur when you check your own credit, when lenders send pre-approved offers, or when employers run background checks. Also called a 'soft pull.'

The total amount owed on a credit card at the end of a billing cycle, as shown on your monthly statement. Paying the statement balance in full each month avoids interest charges and keeps your utilization low by the next statement date.

The date your credit card billing cycle closes and your statement is generated. The balance reported to the credit bureaus is typically your balance on the statement date — not your payment due date. Paying your balance before the statement date results in a lower reported balance.

A loan used to pay for higher education expenses. Federal student loans (offered through the US Department of Education) have fixed interest rates and income-driven repayment options. Private student loans are offered by banks and lenders and depend heavily on credit history for approval and rates.

A classification for borrowers with credit scores below the prime threshold (typically below 620–670) who are considered higher lending risks. Subprime loans carry higher interest rates to compensate lenders for the increased risk of default.

A commercial employment verification database owned by Equifax. Contains employment and income data from millions of employers. Used by lenders, landlords, and government agencies to verify employment status and income. Consumers can request their report and dispute errors.

A credit file with limited credit history — typically fewer than five accounts or a very short history. Thin files can result in no score (a 'credit invisible' status) or a lower score. Common among young adults, recent immigrants, and people who have primarily used cash.

Any credit account listed on your credit report, including credit cards, loans, and lines of credit. Each tradeline includes account details such as the creditor's name, account number, credit limit or loan amount, balance, and payment history.

One of the three major US credit bureaus. TransUnion collects and maintains credit data and provides credit reports, scores, and consumer protection services. Headquartered in Chicago, Illinois.

A standard credit card that doesn't require a deposit. Credit is extended based on your creditworthiness. Most credit cards — including rewards cards — are unsecured. Generally requires fair to good credit (580+) to qualify.

Debt not backed by collateral. Credit cards, personal loans, and medical bills are typically unsecured. If you default, the lender cannot directly seize your property (though they can sue and obtain a judgment). Unsecured debt generally has higher interest rates than secured debt.

A mortgage benefit available to eligible US veterans, active-duty service members, and surviving spouses, guaranteed by the Department of Veterans Affairs. No down payment required, no private mortgage insurance, and competitive interest rates. No official minimum credit score from the VA, though most lenders require 620.

A credit scoring model developed jointly by Experian, TransUnion, and Equifax, first introduced in 2006. VantageScore 3.0 and 4.0 also use a 300–850 scale. Commonly used by free credit monitoring services and some fintech lenders.

A FICO score of 740–799. Qualifies for excellent interest rates and a wide selection of credit products. Lenders view this range as very low risk. Approximately 25% of consumers score in this range (Experian, 2024).

A legal process allowing a creditor to collect a debt by taking a portion of your paycheck directly from your employer, after obtaining a court judgment. Federal law limits how much can be garnished (generally 25% of disposable income or the amount above 30 times the federal minimum wage, whichever is less).