If you’re going to be effective at repairing your own credit it helps to be familiar with the most common credit related terms you’ll find in the toolbox and understand what those terms mean.
While there are many, many more terms related to credit, the 10 basic ones that you need to know are listed below…
Bankruptcy: When your expenses are higher than your income and you can no longer afford to pay everyone, you can file bankrupt to restructure or eliminate your debt.
Charge Off: Debt not paid in 90 days will show as charged off by the original creditor before it is sold or referred to a collection agency.
Collection: Unpaid debt you owe a creditor that is now with a collection agency and shows up on your report as a collection.
Collection Agency: A company that comes after you for your unpaid debts. They will either purchase or be assigned your debt, and they can legally come after you for it.
Creditor: A business or person you owed or owe a debt to.
Credit Inquiry: This is when your credit report is reviewed because you applied for something.
Debt: Money owed.
Interest: The extra money you are charged outside the price of your purchase, so the bank can make money for giving you the loan.
Judgment: When you have an unpaid debt and a creditor takes you to court and wins. This is a judgement, and if this happens, they can take money directly from your pay check each payday. Avoid This!
Principal: This is the actual amount of money something costs before the bank adds interest to it.
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