Credit & Debt Terms

A 0% intro APR is a promotional period during which a credit card charges no interest on purchases, balance transfers, or both — once it ends, the card's regular rate applies to any remaining balance.

A credit card annual fee is a yearly charge for holding a card, common on premium rewards cards — worth paying only when the benefits you actually use exceed the fee.

An authorized user is someone added to another person's credit card who can spend on the account but has no legal duty to pay — the account's history often appears on the user's credit report, which can help build credit.

A title loan is a short-term, high-cost loan secured by your vehicle's title, meaning the lender can repossess your car if you don't repay.

A bridge loan is a short-term loan that provides temporary financing to buy a new home before your current one has sold.

A business credit card is a card issued in a company's name for business purchases, helping separate business spending, track expenses, and build the business's credit history.

A business credit score is a rating that measures a company's creditworthiness based on how reliably it pays vendors and lenders, and it is tracked separately from the owner's personal credit.

A business line of credit is a flexible loan that lets a company borrow up to a set limit, repay, and borrow again as needed, paying interest only on the amount used.

Buy now, pay later is point-of-sale financing that splits a purchase into a few scheduled installments, often interest-free — convenient, but easy to overextend across multiple plans at once.

A car lease is a long-term rental agreement where you pay for a vehicle's depreciation and use over a set period rather than buying it, then return or purchase the car at the end.

A cash advance is borrowing cash against a credit card's limit — it typically carries an upfront fee and a higher interest rate that starts accruing immediately, with no grace period.

Cash back is a credit card reward paid as a percentage of your spending, redeemable as statement credits, deposits, or checks — the simplest type of reward to value.

A cash-out refinance replaces your mortgage with a larger one and pays you the difference in cash, converting home equity into spendable money.

Chapter 7 bankruptcy is the liquidation form of personal bankruptcy — a court trustee may sell non-exempt assets, and most qualifying unsecured debts are discharged, typically within a few months.

Chapter 13 bankruptcy is the reorganization form of personal bankruptcy, where you keep your assets and repay some or all of your debts through a court-approved plan lasting several years.

A charge-off is a creditor's accounting step declaring a seriously delinquent debt unlikely to be collected — the debt is written off the creditor's books, but you still legally owe it.

Credit card churning is repeatedly opening cards to collect sign-up bonuses and then sidelining or closing them — a strategy that can produce outsized rewards but risks credit score damage, issuer blacklists, and overspending.

A cosigner is someone who signs onto another person's loan and becomes equally and legally responsible for the debt if the primary borrower doesn't pay.

A credit builder loan holds the borrowed amount in a locked savings account while you make monthly payments, releasing the money at the end — the on-time payments are reported to the credit bureaus to build your credit history.

Credit card debt payoff is the process of eliminating high-interest card balances, often using a structured strategy to cut interest and stay motivated.

A grace period is the window between a credit card statement's closing date and its due date during which paying the full balance means no interest is charged on new purchases.

Credit card interest is typically calculated daily by applying your card's daily rate to your balance, which is why carrying a balance compounds the cost quickly.

Credit card rewards are the cash back, points, or miles issuers pay you for spending on their cards — worthwhile only when you pay balances in full, since interest quickly outweighs any rewards earned.

Credit counseling is guidance from a trained counselor, often at a nonprofit agency, who reviews your finances, helps you build a budget, and may set up a debt management plan.

A credit dispute is a formal challenge to information on your credit report, requiring the credit bureau to investigate and correct or remove anything it cannot verify.

Credit invisible describes someone with no credit file at the major bureaus, making it hard to qualify for loans, apartments, or even some services despite having no negative history.

Credit mix is the variety of account types on your credit report — such as credit cards, auto loans, and a mortgage — a minor scoring factor that rewards experience managing different kinds of credit.

Credit monitoring is a service that watches your credit reports and alerts you to changes — such as new accounts or hard inquiries — that could signal fraud or errors.

A credit repair scam is a fraudulent service that promises to erase accurate negative information from your credit report or demands payment before doing any work, both of which are illegal for legitimate credit-repair companies.

A debt collector is a person or company that pursues payment on overdue debts, either on behalf of the original creditor or after buying the debt outright.

A debt consolidation loan is a new loan used to pay off several existing debts at once, leaving you with one monthly payment and, ideally, a lower interest rate.

A debt management plan is a structured repayment program arranged through a credit counseling agency, which negotiates with your creditors — often for reduced rates or waived fees — while you make one monthly payment to the agency.

A debt payoff calculator is a tool that shows how long repaying your debts will take — and how much interest you'll pay — under different payment amounts and strategies.

A debt relief scam is a deceptive offer to reduce or eliminate your debts that instead charges high upfront fees, damages your credit, or collects payments without ever settling anything with your creditors.

Debt settlement is negotiating with creditors to accept less than the full balance owed — an approach that can shrink your debt but typically damages your credit and may create taxable income.

A debt spiral is a worsening cycle in which mounting interest and new borrowing make balances grow faster than someone can pay them down.

A debt validation letter is a written request that forces a debt collector to prove a debt is real, accurate, and actually yours before collection can continue.

A debt-free journey is the deliberate, often years-long process of paying off all consumer debt, popularized by online communities that share milestones and payoff strategies.

A deed in lieu of foreclosure is voluntarily handing a property back to the lender to settle the mortgage debt and avoid the foreclosure process.

Default risk is the chance that a borrower — whether a company, a government, or an individual — fails to repay a debt as promised.

A deficiency balance is the amount you still owe after repossessed or foreclosed collateral sells for less than your remaining loan balance.

Delinquency is the status of a loan or credit account whose required payment is past due, growing more serious the longer the balance goes unpaid.

A derogatory mark is a serious negative item on a credit report — like a collection, charge-off, bankruptcy, or foreclosure — that can suppress your credit score for years.

Eviction is the legal process a landlord uses to remove a tenant from a rental property, usually for unpaid rent or a lease violation.

Experian Boost is a free Experian feature that lets you add on-time payments for bills like utilities, phone, and streaming services to your Experian credit file, which can raise your score with that bureau.

Extra principal payments are amounts you pay above your required mortgage payment that go straight toward the loan balance, cutting the interest you owe and paying the loan off faster.

The Fair Credit Reporting Act is a federal law that governs how credit-reporting companies collect and share your information, giving you the right to see your credit reports and dispute errors on them.

The Fair Debt Collection Practices Act is the federal law that limits how third-party debt collectors can behave — banning harassment, lies, and unfair tactics and giving consumers the right to dispute and verify debts.

A fraud alert is a free flag on your credit file telling lenders to take extra steps to verify your identity before approving new credit in your name.

AnnualCreditReport.com is the federally authorized website where you can get free copies of your credit reports from the three nationwide bureaus — Equifax, Experian, and TransUnion.

Gap insurance covers the difference between what you owe on a car loan or lease and the vehicle's actual value if it is totaled or stolen.

Good debt vs. bad debt is a framework that separates borrowing that can build wealth or income — like a reasonable mortgage or education — from borrowing that funds consumption at high interest rates.

A goodwill letter is a polite written request asking a creditor to remove an accurate negative mark, such as a single late payment, from your credit report as a courtesy.

A Grad PLUS loan is a federal loan that graduate and professional students used to borrow for education costs beyond their other aid, though it is no longer available to new borrowers as of 2026 under a 2025 budget law.

A guarantor is someone who promises to repay another person's debt, but usually only after the lender has first tried to collect from the primary borrower.

A hard inquiry is a credit check made when you actually apply for credit — it can shave a few points off your score temporarily and stays on your credit report for about two years.

This strategy uses a home equity line of credit to pay down mortgage principal in chunks to cut total interest, a tactic that carries real risks and doesn't suit everyone.

An IRS installment agreement is a payment plan that lets you pay a tax debt in monthly installments over time instead of all at once, though penalties and interest continue to accrue.

An installment loan is any loan repaid in a fixed number of scheduled payments — like a mortgage, auto loan, or personal loan — as opposed to revolving credit.

An insurance score is a rating drawn largely from your credit history that some insurers use to help set your premium.

Interest rate hikes are increases in a central bank's benchmark rate that make borrowing more expensive, usually intended to slow inflation.

Invoice factoring is a financing method where a business sells its unpaid customer invoices to a third party at a discount to get cash immediately instead of waiting for customers to pay.

A judgment is a court's official ruling that you owe a debt, giving the creditor powerful collection tools such as wage garnishment or a levy on your bank account.

A late payment is a debt payment made after its due date, which can trigger fees and, once at least 30 days overdue, damage your credit score when reported to the credit bureaus.

A lease buyout is purchasing your leased vehicle — either at the end of the lease or early — for the price set in your lease agreement.

Length of credit history measures how long your credit accounts have been open, including the age of your oldest account and the average across all of them — older is generally better for your score.

Leverage is the use of borrowed money to increase the size of an investment, magnifying gains when prices move your way and magnifying losses when they don't.

A lien is a legal claim against property that secures a debt, and it generally must be paid off before the property can be sold with clear title.

A line of credit is a flexible borrowing arrangement that lets you draw funds as needed up to a set limit, paying interest only on what you actually use.

Default is what happens when a borrower fails to repay a loan as agreed for long enough that the lender declares the contract broken, triggering consequences like collections, credit damage, or loss of collateral.

A loan modification is a permanent change to a mortgage's terms, such as the rate or repayment timeline, made to help a struggling borrower keep the home.

Principal is the amount of money you actually borrowed — the base on which interest is charged and the balance your payments work to reduce.

A loan shark is an illegal lender who charges extreme interest rates and often uses intimidation or threats to collect, operating entirely outside consumer protection laws.

A loan term is the length of time you have to repay a loan — longer terms mean lower monthly payments but more total interest paid.

Margin is money borrowed from a brokerage to buy investments, using your existing holdings as collateral — it amplifies both gains and losses.

A margin call is a brokerage's demand that you add money or securities to your account because its value has fallen too far relative to what you borrowed, and your holdings can be sold without your consent if you don't.

Medical bill negotiation is the process of contacting a provider to lower a medical bill, arrange a payment plan, or correct billing errors.

Medical debt is money owed for healthcare services, often arising unexpectedly — and frequently negotiable through payment plans, hospital financial assistance, or billing corrections.

Mortgage forbearance is a temporary pause or reduction in mortgage payments a servicer grants during financial hardship, with the missed amounts still owed later.

A mortgage note is the legal document in which a borrower promises to repay a home loan, spelling out the amount, interest rate, and repayment terms.

Negative equity means owing more on an asset — most commonly a car or a home — than the asset is currently worth.

An offer in compromise is an agreement that lets a taxpayer settle a tax debt with the IRS for less than the full amount owed when paying in full would create genuine financial hardship.

An origination fee is an upfront charge a lender takes for processing a new loan, usually calculated as a percentage of the amount borrowed.

A pawn loan is a small loan secured by an item of value you leave with a pawnshop — if you don't repay, the shop keeps and sells the item, with no effect on your credit.

Pay for delete is a negotiation tactic where you offer to pay a collection account in exchange for the collector removing it from your credit reports — collectors are not obligated to agree.

A payday loan is a very short-term, high-cost loan meant to be repaid from your next paycheck, with fees that often work out to triple-digit annual interest rates.

Payment history is the record of whether you have paid your credit accounts on time — the single most influential factor in your credit score.

Peer-to-peer lending uses online platforms that let individuals lend money directly to other people or small businesses for interest, bypassing banks.

Piggybacking is building credit by being added as an authorized user on someone else's well-managed credit card, letting their positive payment history appear on your credit report.

A life insurance policy loan lets you borrow against the cash value of a permanent life policy, with any unpaid balance reducing the death benefit.

Predatory lending is any lending practice that exploits borrowers through unfair, deceptive, or abusive terms — such as hidden fees, unaffordable payments, or targeting vulnerable groups.

A prepayment penalty is a fee some lenders charge for paying off a loan earlier than scheduled, compensating them for interest they would otherwise have earned.

The prime rate is the interest rate banks charge their most creditworthy customers, used as a starting point for pricing many credit cards and consumer loans.

Rent reporting is a service that adds your on-time rent payments to your credit reports, helping renters build credit history from a bill they already pay.

Renting with bad credit refers to the difficulty of qualifying for a lease when your credit history is weak, which landlords may offset by requiring a larger deposit, a cosigner, or proof of income.

Repossession is a lender taking back collateral — most commonly a car — after a borrower defaults on a secured loan, often without needing a court order.

Revolving credit is a credit line you can borrow from, repay, and borrow from again — like a credit card — with required payments that vary based on your balance.

An SBA loan is a business loan made by a bank but partly guaranteed by the Small Business Administration, which lowers the lender's risk and often means better terms for the borrower.

A secured credit card is backed by a refundable cash deposit that usually sets the credit limit, making it a common tool for building or rebuilding credit when unsecured cards are out of reach.

A short sale is selling a home for less than the remaining mortgage balance with the lender's approval, an alternative to foreclosure for underwater homeowners.

Snowflaking is putting small, unexpected bits of extra money toward debt as they come up, on top of your regular payments, to speed up payoff.

SOFR, the Secured Overnight Financing Rate, is a benchmark interest rate based on overnight lending in U.S. Treasury markets that replaced LIBOR for pricing many loans.

A soft inquiry is a credit check that does not affect your credit score — such as checking your own credit, prequalification offers, or background screening.

The statute of limitations on debt is the state-law time limit after which a creditor can no longer sue you to collect — the debt itself doesn't disappear, and making a payment can sometimes restart the clock.

Student loan consolidation combines multiple federal student loans into a single new federal loan with one monthly payment and a rate based on the average of the original loans.

Student loan default is the status a loan reaches after a borrower misses payments for an extended period, triggering serious consequences like damaged credit and possible wage garnishment.

Student loan deferment is an approved pause on loan payments for reasons such as school enrollment or hardship, during which certain loans may not accrue interest.

Student loan forbearance is a temporary pause or reduction in loan payments granted during hardship, but unlike some deferments, interest keeps building on all loan types.

Interest capitalization is when unpaid student loan interest is added to the principal balance, so future interest is charged on a larger amount — making the loan cost more.

Student loan rehabilitation is a one-time process that lets a borrower bring a defaulted federal loan back into good standing by making a series of agreed-on payments.

A tax levy is the actual seizure of property to satisfy an unpaid tax debt — unlike a lien, which is only a claim, a levy lets the IRS take wages, bank balances, or other assets.

A tax lien is the government's legal claim against your property when you fail to pay a tax debt — it attaches to what you own and can complicate selling assets or borrowing until it is resolved.

A thin credit file means you have too little credit history for scoring models to evaluate you reliably, which can lead to denials even without any negative marks.

Travel rewards are credit card points or miles redeemable for flights, hotels, and other travel — their value per point varies widely by program and by how you redeem them.

The Truth in Lending Act is a federal law that requires lenders to disclose the true cost of borrowing — including the annual percentage rate and fees — so you can compare loan and credit offers fairly.

An underwater car loan is one where you owe more than the vehicle is currently worth, which becomes a problem if the car is totaled, stolen, or you need to sell it.

An underwater mortgage means you owe more on your home loan than the property is currently worth, leaving you with negative equity.

Usury is lending money at an interest rate above the legal maximum — usury caps are set by state law and vary widely.

VantageScore is a credit scoring model created jointly by the three major credit bureaus as a rival to FICO — it uses the same 300-to-850 range but weighs the details of your credit file somewhat differently.

Velocity banking is a debt-payoff strategy that uses a line of credit to make large lump-sum payments toward a mortgage or loan, then routes income through the credit line to reduce interest.

Wage garnishment is a legal process where part of your paycheck is withheld by your employer and sent directly to a creditor, usually after a court judgment.

Zero liability protection is a policy offered by most card networks and issuers that shields you from paying for unauthorized charges on your credit or debit card when you report them promptly.

Zombie debt is old debt — often past the statute of limitations, already settled, or not even yours — that a collector tries to bring back to life and pressure you into paying.