Schumer Box | An easy to use chart that explains the rates, fees, terms and conditions of a credit account. Creditors are required to provide this on credit applications by the U.S. Truth in Lending Act and it usually appears on statements and other documents.
Scoring Model | A complex mathematical formula that evaluates financial data to predict a borrower’s future behavior. Developed by the credit bureaus, banks and FICO, there are thousands of slightly different scoring models used to generate credit scores.
Second Mortgage | A loan using a home’s equity as collateral. A first mortgage must be repaid before a second mortgage in a sale.
Secured Credit Card | A consumer credit account that requires the borrower to produce some form of collateral—usually a cash deposit equal to the amount of the credit limit on the card. Secured credit cards are easier to obtain than standard credit accounts and are helpful for borrowers with poor credit or no credit.
Secured Debt | A loan that requires a piece of property (such as a house or car) to be used as collateral. This collateral provides security for the lender, since the property can be seized and sold if you don’t repay the debt.
Secured Loan | A loan that is backed by collateral, such as an auto loan or a loan that finances the purchase of some appliances or furniture.
Settlement An agreement reached with a creditor to pay a debt for less than the total amount due. Settlements can be noted on your credit report and can negatively impact your credit score. The only time it is a good idea to settle a debt is if the debt has already gone to collections or is significantly past due. Settling a debt that is current and in good standing can have a severe negative impact on your credit score.
Social Security Number | Also referred to as a SSN. This unique nine digit number is meant to track your Social Security savings but is also used by creditors, lenders, banks, insurers, hospitals, employers and numerous other businesses to identify your accounts. People who do not have a SSN, such as non-US citizens, use a nine digit Individual Taxpayer Identification Number (ITIN) instead.
Soft Inquiry | A type of inquiry that does not harm your credit score. Soft inquires are recorded when a business accesses your credit data for a purpose other than an application for credit. Soft inquiries include your request to see your own credit report and employment-related requests. This type of inquiry is recorded by the credit bureaus but does not usually appear on a credit report purchased by you or a business.
Subprime Borrower | A borrower who does not meet the qualifications for standard or “prime” credit and loan offers. Usually a subprime borrower has poor credit (a score under 650) due to late payments, collection accounts or public records. Lenders often grade them based on the severity of past credit problems, with categories ranging from “A-” to “D” or lower. Subprime borrowers can qualify for loans and credit, but usually at a higher interest rate or with special terms.
Tax Lien | A claim against property, or assets, field by the taxing authority for unpaid taxes.
Teletrack A credit reporting system that specifically tracks subprime borrowers or borrowers with no official credit. Data about payday loan payments, rent payments and non-standard lenders is collected to develop accurate risk predictions for borrowers who may not be included in the standard credit reporting system.
Tradeline The official term for an account listed on a credit report. Each account’s details (including payment history, balances, limits and dates) are recorded in a separate tradeline.
Transaction Fees | Fees for various transactions. Like using your card for cash advances.
TransUnion One of the three national credit bureaus that collects and provides consumer financial records. TransUnion operates the TrueCredit and FreeCreditProfile brands.
TRW A former credit reporting agency that is now part of Experian.
Universal Default Clause | A credit card policy that allows a creditor to increase your interest rates if you make a late payment on any account, not just on their account. Universal default clauses were banned under the CARD Act – credit card issuers are no longer allowed to use this practice to increase cardholder interest rates.
Universal Default Rate | Outlawed by the Credit CARD Act of 2009, universal default was a policy some lenders/creditors used to punish borrowers who pay any creditor late. It was most commonly used by credit card companies and revealed in the fine print of their contracts with consumers.
Unsecured Debt | A loan on which there is no collateral. Most credit card accounts are unsecured debt.
Unsecured Loan | A loan that is not backed by collateral; it is guaranteed only by the borrower’s promise to repay.
Utilization Ratio | The ratio between the credit limits on your accounts and the outstanding balances. This ratio shows lenders how much of your available credit you are using overall.
Variable Expenses | Expenses that are due each month but are not consistent in their amounts, like credit card bills, groceries, utility bills and gas.
Variable Rate | A type of adjustable rate loan tied directly to the movement of some other economic index. For example, a variable rate might be prime rate plus 3%; it will adjust as the prime rate does.