Credit Information and Personal Finance Resources | Credit One Bank

Credit One CentralTM

Explore ways to manage your credit and finances with Credit One Central. These informational articles and resources can help guide you in your everyday life.

No More Confusion—20 Credit Terms Defined

No More Confusion—20 Credit Terms Defined

If you’ve ever read a credit card or loan application, you probably encountered more than a few words that seemed to be written in a separate language. Credit terms can be descriptive and self-explanatory at their best, but also unclear and confusing at their worst. Especially given most of us don’t spend a lot of time perusing credit documents in our daily lives.

What follows are 20 common credit terms most everyone should be familiar with. Doing so will hopefully save you some time and head-scratching the next time you review your statement, think about getting a new credit card, or dive into an article about credit.

1. Annual Percentage Rate (APR)

This term—usually in its acronym form—is ubiquitous in the credit world. It is essentially the percentage of interest charged on your outstanding loan balance, expressed as a yearly rate.

APR differs from annual interest rate on certain loans, such as home mortgages, in that it also includes other costs/fees associated with the loan in its calculation. However, with credit cards, APR and annual interest rate are the same.

2. Authorized User

An authorized user is a person added to a credit card account who’s allowed to make charges. They get a credit card of their own with their name on it and are able to make purchases with the card up to its credit limit; however, authorized users do not have all of the same privileges as primary account holders.

An authorized user cannot be held responsible for paying any of the credit card’s bill—even the charges they made. The primary account holder is ultimately responsible for all authorized charges.

Activity on the account from both the primary account holder and the authorized user will be reflected on the primary account holder’s credit report. It may also show up on an authorized user’s credit report, depending on the credit card company’s policy.

An authorized user cannot be held responsible for paying any of the credit card’s bill—even the charges they made. The primary account holder is ultimately responsible for all authorized charges.

3. Average Daily Balance

This balance is used by credit card companies to calculate interest. The average daily balance is the sum of the outstanding balance from each day of your credit card billing cycle dividing by the number of days in that billing cycle.

So, say, your billing cycle was five days long, and your outstanding balances at the end of each day of the cycle were as follows:

Day 1: $50
Day 2: $100
Day 3: $150
Day 4: $200
Day 5: $250

Your average daily balance would be $150 ($750 ÷ 5).

4. Credit Bureau (aka Credit Reporting Agency, Consumer Reporting Agency)

There are three main credit bureaus in the United States: Experian®, Equifax®, and TransUnion®. These agencies collect and document information provided to them by banks, credit card companies, and other financial institutions on the credit behavior of individual consumers.

They also sell this information in the form of credit reports to lenders in order to help them make better-informed decisions on granting credit.

5. Credit Utilization Ratio (aka Credit Utilization Rate)

Math is important in the credit world, and this ratio is used to express how much you owe in relation to how much available credit you have. The mathematical formula for calculating your Credit Utilization Ratio (CUR) is as follows:

Sum of Your Outstanding Revolving Credit Balances ÷ Sum of Your Revolving Credit Limits

CUR is used to calculate credit scores, accounting for up to 30% of your score. While there’s no hard-and-fast rule on what your credit utilization ratio should be, many experts recommend it be below 30%.

6. EMV

That little metallic square found in credit cards is actually an EMV computer chip. EMV stands for Europay®, Mastercard®, and Visa®, the three companies that originally created the standard for this technology to help make credit card transactions more secure.

Unlike magnetic stripes (aka magstripes) on credit cards that contain all of a card’s information, which can be used over and over if copied, EMV chips create a unique transaction code for each purchase, which cannot be used a second time. So, if a fraudster were to copy your credit card’s chip information from a particular point of sale, that information would not be usable to make future fraudulent charges.

7. FICO® Score

A FICO Score is a three-digit number used to assess the credit risk of a borrower, created by the Fair Isaac Corporation. This score ranges from 300 to 850 and is calculated using the following five categories:

• Payment History (35% of your score)
• Amounts Owed (30% of your score)
• Length of Credit History (15% of your score)
• Credit Mix (10% of your score)
• New Credit (10% of your score)

FICO Score is one of the two major models used to calculate credit scores, the other being VantageScore®.

8. Hard Inquiry

A hard inquiry, also known as a “hard pull,” is when a potential lender checks your credit report because you’ve applied for credit with them. A hard inquiry may lower your credit score by a few points, and it stays on your credit report for up to two years.

Each credit check counts as a single hard inquiry, so too many hard inquiries over an extended period of time could lower your credit score and signal to potential lenders that you’re desperate for credit. However, if you’re shopping for the best rate or deal to finance a home, car, etc., multiple hard inquiries done within a short period of time—45 days for FICO—may be treated as a single hard inquiry.

9. Installment Credit (aka Installment Loan, Installment Debt)

“Installment” is the key word in this term, as it’s what differentiates this type of credit or debt from “revolving” credit. An installment loan entails borrowing a specific amount of money, which is paid back in payments of a set amount on a regular basis (usually monthly) over a defined period of time.

An example of an installment loan would be an auto loan, where, say, you agree to make a monthly payment of $500 over a set period of four years. Home mortgages and student loans are also examples of installment loans.

10. Late Payment Fee

If you’re a borrower and miss making at least the minimum payment to your lender by the payment due date, you are likely to get hit with this fee, depending on the terms and conditions of the credit agreement you signed. Credit card late fees are regulated by federal law, and it’s worth noting that even if your payment is received on time but is less than the minimum payment, you may still be assessed a late payment fee.

In order to avoid a late payment fee, most lenders require payments to be received by the due date, not just postmarked by that date.

In addition to being hit with a fee, a late payment may also be reflected on your credit report and could adversely affect your credit score.

Even if your payment is received on time but is less than the minimum payment, you may still be assessed a late payment fee.

11. Minimum Payment

As the name makes clear, this is the minimum amount you can pay on a loan to make or keep your account current. Making at least the minimum payment on time may also help you avoid penalties and fees, such as a late payment fee.

Even if you make a partial payment on time, if you fail to pay at least the minimum payment amount, you are technically past due, and your lender may report you to the credit bureaus as such.

12. Return Payment Fee (aka Returned Check Fee)

If you make a payment by check, and your check bounces, you may be assessed a return payment fee by your lender. You may also be hit with an additional fee by your bank for writing a check with insufficient funds to cover it.

13. Revolving Credit/Loan/Debt

“Revolving” is the key word in this term, as it’s what differentiates this type of credit from “installment” credit or debt. You can use this type of credit repeatedly, up to your credit limit, so long as the account stays open and you’re making on-time minimum payments.

A credit card is an example of revolving credit. So are personal and home equity lines of credit.

14. Rewards Card

As an incentive for you to spend more with their credit card, many companies offer these types of cards, which reward you for every purchase made with their card. These rewards can include cash back; airline miles; or discounts on gas, hotel rooms, utilities, and more.

A rewards card is an excellent way to earn bonuses just for making everyday or recurring purchases. However, it may not make sense if you’re paying more in fees or interest than you’re earning in actual rewards.

15. Secured Credit Card

This type of credit card requires the card holder to “secure” or back it with collateral, typically a cash deposit equal to the card’s credit limit. Secured credit cards are mainly targeted at consumers with no or poor credit and can be useful in establishing and building a credit history.

16. Skimming

As it pertains to credit cards, this is the act of electronically stealing credit card information, which is subsequently used for fraudulent activity.

Criminals typically place a skimming device over a credit card reader, say, at a gas pump, which copies the card’s information. They then take that information to make fraudulent online charges or to clone bogus credit cards.

17. Soft Inquiry

Also known as a “soft pull,” this is a check on your credit report that, unlike a hard inquiry, does not affect your credit score. Soft inquiries are not a result of you directly applying for credit. They are usually done without you even knowing about them, typically by credit card and other financial companies to see if you qualify for their products before sending you an offer.

It’s important to know that checking your own credit report is a soft inquiry and will not damage your credit score.

18. Unsecured Debt

This is a loan that doesn’t require any form of collateral. Examples of unsecured debt include credit cards (excluding secure credit cards), student loans, utilities, and rent.

Unsecured debt differs from secured debt, which is backed by collateral, such as a home or car. A car loan and home mortgage are both examples of secured loans.

19. VantageScore®

A VantageScore is a three-digit number used to assess the credit risk of a borrower. It was created by the three major credit bureaus, Experian, Equifax, and TransUnion. This score ranges from 300 to 850 and is calculated using the following categories:

• Payment History (28% of your score)
• Amount of Recent Credit (30% of your score)
• Utilization of Current Credit (23% of your score)
• Size of Account Balances (9% of your score)
• Depth of Credit (9% of your score)
• Amount of Available Credit (1% of your score)

VantageScore is one of the two major models used to calculate credit scores, the other being FICO® Score.

20. Zero Fraud Liability (aka Zero Liability)

This is a policy adapted by some credit card companies that extends protection against fraudulent charges beyond what’s federally mandated by law. The Fair Credit Billing Act (FCBA) limits a consumer’s liability for fraudulent credit card charges to $50. Zero liability policies reduce a consumer’s liability to $0 if their card or card information is stolen and used to fraudulently purchase goods or services.

Some companies also apply this policy to debit cards, which are protected at different amounts than credit cards, depending on when any fraudulent charges are reported.


 

« Return
This material is for informational purposes only and is not intended to replace the advice of a qualified tax advisor, attorney or financial advisor. Readers should consult with their own tax advisor, attorney or financial advisor with regard to their personal situations.
Credit One Bank Testimonials

Customer Testimonials & Success Stories

Looking to reach your financial goals? See how Credit One Bank helps people purchase a house or car, handle emergencies and build their credit.

Read More

See If You Pre-Qualify Today

With a Credit One Bank Platinum Visa®, you'll earn 1% cash back on eligible purchases, terms apply, and receive many benefits like free online access to your credit score and $0 Fraud Liability.

In less than 60 seconds, find the card that's right for you!



Credit One Bank Credit Card

 Terms of Use 

Credit One Bank maintains our various websites (hereinafter referred to as "website") as a service to our customers and visitors in order to provide information about products and services and to facilitate communication with us. We require that all customers and visitors to our website adhere to these Terms of Use. By accessing our website and any of its pages, you indicate your acknowledgement and acceptance of the Terms of Use set forth herein without limitation or qualification. We may revise the Terms of Use at any time by updating this posting. You should therefore visit this posting to review the Terms of Use from time-to-time as you visit the website. For the purposes of these Terms of Use, references to Credit One Bank include its affiliates, directors and employees.

COPYRIGHT - The information and materials contained in the website, including but not limited to text and images herein (excluding certain images licensed from third parties) and their arrangement are © Copyright 2015 by Credit One Bank. The information and materials contained in the website may not be copied, displayed, distributed, licensed, modified, published, sold, used to create derivative work or otherwise used for public or commercial purposes without the express written permission of Credit One Bank.

LIMITATION OF LIABILITY - We use our best efforts to include accurate and up-to-date information and materials on the website, however, information and materials on the website are provided "as is" without any warranty of any kind, either express or implied, including but not limited to the implied warranties of merchantability, fitness for a particular purpose and non-infringement. Furthermore, we make no representations as to the accuracy or completeness of the information. The information and materials on the website may include technical inaccuracies or typographical errors. From time-to-time we may amend, change, add, delete, update or alter the information and/or materials contained in the website, including information regarding the products and services described or offered on the website, without notice. We assume no liability for any errors or omissions in the information or materials contained within the website and expressly disclaim any responsibility to update the information or materials contained within the website. By using the website, you acknowledge that we specifically disclaim any liability for any direct, indirect, special, unsolicited or consequential damages, losses or expenses arising out of your access to or use of the website, even if we have been advised of the possibility of such damages, including liability associated with any viruses or software which may impact a user's equipment.

GOVERNING LAW - You agree that your use of the website shall be governed by all applicable Federal laws and the law of the state of Nevada.

INFORMATION SUBMISSIONS - All information and materials (including but not limited to feedback data, documents, questions, comments, and suggestions) you submit to us via the website or email shall be deemed to be the property of Credit One Bank and may be used by us in a manner consistent with our Privacy Policy. We shall be free to reproduce, use, disclose, exhibit, display, transform, create derivative works and distribute this information and materials to others without limitation. Furthermore, we shall be free to use any ideas, concepts, know-how or techniques contained in such information or materials for any purpose whatsoever, including but not limited to developing, manufacturing and marketing purposes. Application information submitted to us shall be treated confidentially to the extent required by applicable law or as disclosed in the application and/or supporting materials.

ADVERTISING DISCLOSURE AND LINKS TO OTHER WEBSITES - We do not provide, endorse, nor guarantee any third-party product, service, information, or recommendation available through links from this website. The third parties providing products and services available through this website are not affiliated with us and are solely responsible for their products, services, information, recommendations, and all other content on their websites. We shall not be held liable for any third party's failure with regard to such advertised products, services, and benefits. Many of these advertised products and services are not FDIC insured, nor bank guaranteed. By responding to offers advertised on this website, you may be communicating information about yourself to the company that provides such product or services - for example, that you are a Credit One Bank customer. Please be aware that these third parties may have a different privacy policy than ours. Their website(s) may also provide less security than ours. We encourage you to check individual offers, products, and services to become familiar with any applicable restrictions or conditions.

×
 Security & Fraud  

We are committed to protecting the security of your personal information. We list some activities below that we perform in order to safeguard your data and some tips that you can follow to protect your security.

What We Do:

  • We employ industry-proven standards and technologies to protect information in our computing environment.
  • We protect our systems and networks from the Internet with Firewall systems.
  • We use 128-bit SSL encryption technology to protect sensitive information that is transmitted over the Internet.
  • We maintain a Global Digital Certificate signed by Verisign® that assures you are, in fact, communicating directly with Credit One Bank.
  • We control access to your information inside our company by limiting employee access to systems and data.

What You Should Do:

  • Protect your Username and Password. Avoid choosing easily guessed words or numbers. Avoid writing your Sign In information in a place where others can view it.
  • Use the "Sign Out" button to Sign Out from Online Account Access upon completion of your session and close your browser.
  • Do not use email for account-specific questions. Email is not normally encrypted and your account information could be intercepted.
  • Review your statement information regularly for unauthorized transactions.

Alerts Regarding Phishing and Web-Spoofing:

  • Phishing is an Internet scam (spoof) in the form of an email or pop-up box. The emails and pop-ups link to sites that look like well-known legitimate businesses and ask you to provide and confirm personal, financial, or password information.
  • Legitimate businesses do not ask for this information unless you initiate a request for a service. Please DO NOT RESPOND to these emails requesting personal identity, accounts or password information.
  • Scam emails often contain misspelled words, poor grammar, awkward or unprofessional writing and typos.
  • Be suspicious of urgent or alarming appeals that request security information.

Fraud Alerts:

  • Credit One Fraud Alerts messages are provided to you at no cost. You will not be charged for alerts received.
  • Message frequency varies, as they are only sent when there is suspicion of fraud.
  • Mobile carriers are not liable for delayed or undelivered messages.
  • For help send HELP to 89283.
  • Send STOP to 89283 to end future fraud alert messages.
  • For support contact us at 1-877-825-3242.

To learn other ways to avoid email scams and deal with deceptive spam visit the Federal Trade Commission site at www.ftc.gov/spam

×

You are leaving CreditOneBank.com

If you the 'Continue' button, you will be directed to a third-party website unaffiliated with Credit One Bank, which may offer a different privacy policy and level of security. Credit One Bank is not responsible or liable for, and does not endorse or guarantee, any products, services, information or recommendations that are offered or expressed on other websites.

the 'Return to CreditOneBank.com' button to return to the previous page or 'Continue' to proceed to the third-party website.

Return to CreditOneBank.com Continue