A Credit Repair Glossary
A Credit Repair Glossary – Important Terms You Need to Know
It can sometimes be intimidating when speaking with a creditor or collections agent if they keep throwing out terms that you don’t completely understand. Oftentimes a consumer will be reluctant to ask questions for fear of appearing ignorant, and this combination can result in some confusing conversations. Here is a glossary of some of the more common terms a person may encounter when attempting to repair their credit.
ACH Debit – This stands for “Automated Clearing House.” An ACH debit is a quick way for creditors to take funds from a bank account electronically. Many collectors and creditors will suggest this form of payment since it is much quicker than waiting for a check in the mail. Beware, however, of agreeing to this form of payment without first finding out the company’s ACH policies; many creditors may continue to utilize ACH debits without first notifying the customer once they have been granted initial access to the account.
CCCS – This stands for “Consumer Credit Counseling Service,” a type of company that pays bills for consumers. Some creditors may suggest a consumer seeks out this sort of organization if the consumer is having a hard time keeping up with bills. It is imperative, however, to make sure the CCCS chosen is a reputable one, or the bills might wind up even further behind.
Charge-off – A charge-off is a sort of last resort from collectors. It means that the company has made repeated attempts to collect on the debt, and after a certain number of days with no payments the company has essentially given up hope of ever getting paid. The debt remains the legal obligation of the borrower, but the company does not actively seek payment. It is noted on the credit report as an unpaid charge-off unless the customer eventually pays the debt, in which case it is noted as a paid charge-off. Both notations are detrimental to credit reports, and should be avoided if possible.
Cosigner and Authorized User – There is a big difference between a cosigner and an authorized user. Both have access to the accounts for purchasing, but only the cosigner is liable for payments. For example, if a boyfriend makes his girlfriend an authorized buyer on a credit card the girlfriend can then go and spend all she wants and cannot be pursued by the lender if the boyfriend defaults. If, on the other hand, the girlfriend is a cosigner, she is legally obligated to pay the debt if the boyfriend defaults, even if she didn’t use the card.
FICO – A FICO score is a credit score derived from the information on the credit report. “FICO” actually stands for Fair Isaac and Company, which was the first credit scoring company. If a consumer is told they’re being turned down because of a low FICO, the lender is referring to the credit score.
Inquiries – If a creditor advises a borrower that there are too many inquiries on their report they are referring to all the companies who have taken a look at the credit report with the consumer’s permission. There is a list of inquiries at the end of every credit report, and the longer it is the more nervous a credit can become. Exceptions to this are many inquiries for a single purchase, such as with car buying or mortgage lenders. Too many inquiries can lower a credit score, so it is wise to limit credit applications.
Revolving – This refers to revolving credit or credit on accounts such as credit cards where the available balance adjusts with purchases and payments. For example, a revolving balance on a credit card or line of credit may be $1000 until the cardholder makes a $100 purchase. The available balance then becomes $900 until a payment is made, then the available balance goes back up. Car loans and other types of loans are not revolving balances, as the proceeds are received in one lump sum and there is not a way to take more money out of the loan after making payments, with the exception of refinancing.
Credit repair doesn’t have to be scary…a consumer armed with knowledge and not afraid to ask questions will feel empowered and ready to tackle the credit repair aggressively.
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