Financial Terms Glossary: H I J

Hard Inquiry | A record of a business request to see your credit report data for the purpose of an application for credit. Hard inquiries appear on your credit report each time you complete an application for a credit card, loan, cell phone, etc. Hard inquiries remain on your credit report for 2 years but are only included in your credit score for the first 12 months. High-LTV Equity Loan | A specific kind of home loan that causes your loan-to-value ratio to be 125% or more. When the total principal of a loan leaves the borrower with debt that exceeds the fair market value of the home, the interest paid on the portion of the loan above that value may not be tax deductible. Home Equity Line of Credit | Often called a HELOC, is an open-ended loan that is backed by the part of a home’s value that the borrower owns outright. This type of loan is used much like a credit card. This type of loan is used much like a credit card. Home equity lines of credit can be effective ways to borrow large sums of money with a relatively low interest rate. These types of loans should be used with caution. If a borrower is unable to pay back the loan for some reason (loss of job, illness, etc.) they risk losing the home they used as collateral. Home Equity | The part of a home’s value that the mortgage borrower owns outright. This is the difference between the fair market value of the home and the principal balances of all mortgage loans. Home Ownership and Equity Protection Act | A law designed to discourage predatory lending in mortgages and home equity loans. Housing Expense Ratio | The percentage of your monthly pre-tax income that goes toward your house payment. The general rule is that this ratio shouldn’t exceed 28%. This is also known as the “front ratio.” Individual Taxpayer Identification Number (ITIN) | This nine digit identification number is issued by the Internal Revenue Service to taxpayers who don’t have a Social Security number, such as people who are not US citizens. This number can be used to apply for credit and loans or to access credit reports. Income Verification | Loan applications may require fully documented proof of an applicant’s income. Inquiry A record on your credit report that shows every time you, one of your creditors, or a potential creditor requests a copy of your credit report data. (See Soft Inquiry, Promotional Inquiry and Hard Inquiry). Installment Account | A type of loan where the borrower makes the same payment each month. This includes personal loans and automotive loans. Mortgage loans are also installment accounts but are usually classified by the credit reporting system as real-estate accounts instead. Installment Debt | Debts that are repaid with a fixed number of payments of equal amount, like an auto loan. Interest Rate Cap | A limit on how much a borrower’s percentage rate can increase or decrease at rate adjustment periods and over the life of the loan. Interest rate caps are used for Adjustable Rate Mortgage ARM loans where the rates can vary at certain points. Interest Rate | A measure of the cost of credit, expressed as a percent. For variable-rate credit card plans, the interest rate is explicitly tied to another interest rate. The interest rate on fixed-rate credit card plans, though not explicitly tied to changes in other interest rates, can also change over time. Interest The money a borrower pays for the ability to borrow from a lender or creditor. Interest is calculated as a percentage of the money borrowed and is paid over a specified time. Interest-Only Loan | A type of loan where the repayment only covers the interest that accumulates on the loan balance and not the actual price of the property. The principal does not decrease with the payments. Interest-only loans usually have a term of 1-5 years. Introductory Rate | A temporary, low interest rate offered on a credit card in order to attract customers. Under the CARD Act, an introductory rate must remain in effect for a minimum of 6 months before converting to a normal or variable rate. Joint Account | An account shared by two or more people. Each person on the account is legally responsible for the debt and the account will be reported to each person’s credit report. Judgment A decision from a judge on a civil action or lawsuit; usually an amount of money a person is required to pay to satisfy a debt or as a penalty. Judgment records remain on your credit report for 7 years and harm your credit score significantly. Jumbo Mortgage | A loan that exceeds the limits set by Fannie Mae and Freddie Mac (usually when the loan amount is more than $200,000-400,000). Also known as a non-conventional or non-conforming loan, these mortgages usually have higher interest rates than standard loans.