Credit Repair Glossary
104 credit repair terms explained in plain English. Your complete reference for understanding credit reports, scores, disputes, and consumer protection law.
Credit Score Factor Weights
How FICO calculates your credit score — the five weighted factors
Credit Score Ranges
FICO score ranges from 300 to 850 — where do you stand?
Quick Reference: Key Acronyms
Fair Credit Reporting Act
Fair Debt Collection Practices Act
Fair Isaac Corporation (score)
Credit Repair Organizations Act
Consumer Financial Protection Bureau
Equal Credit Opportunity Act
Truth in Lending Act
Servicemembers Civil Relief Act
Annual Percentage Rate
Account Age
The length of time a credit account has been open, measured from the date it was established. Account age factors into the "length of credit history" component of your credit score, which makes up approximately 15% of your FICO score. Older accounts generally help your score.
Adverse Action Notice
A written notice that a lender, insurer, or employer must send you when they take a negative action based on information in your credit report. Under the FCRA (15 U.S.C. § 1681m), the notice must identify the credit bureau that supplied the report, inform you of your right to a free copy, and explain your right to dispute inaccurate information.
Amortization
The process of gradually paying off a loan through scheduled payments that cover both principal and interest. In the early years of a mortgage or auto loan, most of each payment goes toward interest. Over time, a larger portion goes toward reducing the principal balance.
Annual Percentage Rate (APR)
The annualized interest rate charged on a loan or credit card balance, expressed as a percentage. APR includes the base interest rate plus certain fees, giving consumers a standardized way to compare borrowing costs. Under the Truth in Lending Act (15 U.S.C. § 1601 et seq.), lenders are required to disclose the APR before you agree to a loan.
AnnualCreditReport.com
The only federally authorized website where consumers can request free credit reports from all three major bureaus — Equifax, Experian, and TransUnion. Under the Fair Credit Reporting Act (Section 612, 15 U.S.C. § 1681j), you are entitled to at least one free report from each bureau every 12 months.
Balance Transfer
Moving an existing credit card balance from one card to another, usually to take advantage of a lower interest rate or a promotional 0% APR period. Balance transfers can help reduce interest costs and pay down debt faster, but typically come with a transfer fee of 3-5% of the transferred amount.
Bankruptcy (Chapter 7)
A form of bankruptcy liquidation under Title 11 of the U.S. Code that discharges most unsecured debts. A Chapter 7 bankruptcy remains on your credit report for 10 years from the filing date. It has the most severe negative impact on your credit score, but allows for a relatively quick fresh start.
Bankruptcy (Chapter 13)
A form of bankruptcy reorganization that involves a 3-to-5-year court-approved repayment plan. Chapter 13 remains on your credit report for 7 years from the filing date. Unlike Chapter 7, it allows you to keep your assets while repaying a portion of your debts.
Bureau (Credit Bureau)
A company that collects and maintains consumer credit information, then sells it to lenders, insurers, and other authorized parties. The three major U.S. credit bureaus are Equifax, Experian, and TransUnion. Also called a consumer reporting agency (CRA) under the FCRA.
CARD Act
The Credit Card Accountability Responsibility and Disclosure Act of 2009 (Public Law 111-24) reformed credit card industry practices. Key protections include requiring a minimum 21-day grace period, prohibiting retroactive interest rate increases on existing balances, restricting marketing to consumers under 21, and requiring 45-day advance notice before rate changes.
Charge-Off
A declaration by a creditor that a debt is unlikely to be collected, typically after 180 days of non-payment. A charge-off does not mean you no longer owe the debt — the creditor may still pursue collection or sell the debt to a collector. Charge-offs remain on your credit report for 7 years from the date of first delinquency.
Learn more: How Long Do Negative Items Stay on Your Report →
Collection Account
A debt that has been transferred or sold to a third-party debt collection agency. Collection accounts are reported separately on your credit report and can significantly lower your score. Under the FDCPA (15 U.S.C. § 1692g), you have the right to request validation of any collection debt within 30 days of first contact.
Consumer Financial Protection Bureau (CFPB)
A federal agency created by the Dodd-Frank Act of 2010 that regulates consumer financial products and services. The CFPB supervises credit bureaus, debt collectors, and lenders. Consumers can file complaints about credit reporting errors through the CFPB at consumerfinance.gov.
Learn more: How to File a Complaint Against a Credit Bureau →
Cosigner
A person who agrees to be equally responsible for repaying a loan or credit account alongside the primary borrower. Both the borrower and cosigner's credit reports reflect the account's payment history. If the primary borrower misses payments, the cosigner's credit score is damaged and they become legally responsible for repayment.
Credit Builder Loan
A small loan designed specifically to help people build credit. Unlike a traditional loan, the borrowed funds are held in a savings account while you make payments. Once fully repaid, you receive the funds. Your payments are reported to the credit bureaus, helping establish a positive payment history.
Credit Counseling
A service provided by nonprofit agencies that helps consumers manage debt, create budgets, and develop repayment plans. Legitimate credit counseling agencies are often certified by the National Foundation for Credit Counseling (NFCC) or the Financial Counseling Association of America (FCAA). Bankruptcy courts require credit counseling before filing.
Credit Freeze
A security measure that restricts access to your credit report, preventing new creditors from pulling it. This makes it very difficult for identity thieves to open new accounts in your name. Under federal law (15 U.S.C. § 1681c-1), you can freeze and unfreeze your credit for free at all three bureaus.
Credit Inquiry (Hard)
A record on your credit report created when a lender checks your credit as part of a lending decision. Hard inquiries typically lower your score by a few points and remain on your report for 2 years, though their scoring impact diminishes after 12 months. Multiple mortgage or auto loan inquiries within a 14-45 day window are usually counted as one.
Credit Inquiry (Soft)
A credit check that does not affect your credit score. Soft inquiries occur when you check your own credit, when a lender pre-approves you for an offer, or when an employer runs a background check. Soft inquiries are visible only to you and are not factored into credit scoring models.
Credit Limit
The maximum amount a lender allows you to borrow on a revolving credit account, such as a credit card or line of credit. Your credit limit directly affects your credit utilization ratio — using a smaller percentage of your available limit is better for your score.
Credit Mix
The variety of credit account types on your report, including revolving accounts (credit cards, lines of credit) and installment accounts (mortgages, auto loans, student loans). Credit mix accounts for approximately 10% of your FICO score. Having a diverse mix can help, but it is not worth opening unnecessary accounts.
Credit Monitoring
A service that tracks changes to your credit report and alerts you to new accounts, inquiries, or significant score changes. Many banks and credit card issuers offer free basic credit monitoring. Paid services may include identity theft insurance, three-bureau monitoring, and faster alerts.
Credit Report
A detailed record of your credit history maintained by each of the three major credit bureaus (Equifax, Experian, TransUnion). It includes personal information, account histories, credit inquiries, and public records. Under the FCRA (15 U.S.C. § 1681g), you have the right to a complete disclosure of your credit file.
Credit Score
A three-digit number (typically ranging from 300 to 850) that represents your creditworthiness based on the information in your credit report. Lenders use credit scores to evaluate the risk of lending to you. The two most common scoring models are FICO and VantageScore, each with slightly different calculation methods.
Credit Utilization
The percentage of your available revolving credit that you are currently using. Calculated by dividing your total revolving balances by your total revolving credit limits. Credit utilization accounts for approximately 30% of your FICO score and is one of the fastest factors to improve. Keeping utilization below 30% is commonly recommended, but below 10% is optimal.
CROA (Credit Repair Organizations Act)
A federal law (15 U.S.C. § 1679) that regulates credit repair companies. CROA prohibits credit repair organizations from charging upfront fees before performing services, making false claims about what they can do, and advising consumers to create new identities. It also requires written contracts and gives consumers a 3-day right to cancel.
Learn more: How to Choose a Legitimate Credit Repair Company →
Date of First Delinquency (DOFD)
The date you first fell behind on a payment that led to the account becoming delinquent and eventually being reported as a negative item. The DOFD is critically important because it determines when the negative item must be removed from your credit report — typically 7 years from this date, regardless of subsequent activity on the account.
Learn more: How Long Do Negative Items Stay on Your Report →
Debt Consolidation
The process of combining multiple debts into a single loan or payment, ideally at a lower interest rate. Common methods include personal consolidation loans, balance transfer credit cards, and home equity loans. Debt consolidation can simplify payments and reduce interest costs but does not reduce the amount owed.
Debt Management Plan (DMP)
A structured repayment plan negotiated by a nonprofit credit counseling agency on your behalf. The agency works with your creditors to potentially lower interest rates and waive fees, then consolidates your monthly payments into one. DMPs typically last 3-5 years and may appear as a notation on your credit report, though they are not scored directly.
Debt Settlement
A negotiation process where you offer a creditor or collector a lump-sum payment that is less than the full amount owed in exchange for the debt being considered satisfied. Settled accounts may appear on your credit report as "settled for less than the full amount," which is still a negative mark but less damaging than an unpaid collection.
Debt Validation
Your legal right under the FDCPA (15 U.S.C. § 1692g) to require a debt collector to prove that the debt is valid, that the amount is correct, and that the collector has the legal right to collect it. You must request validation within 30 days of the collector's initial communication. The collector must cease collection efforts until validation is provided.
Debt-to-Income Ratio (DTI)
The percentage of your gross monthly income that goes toward paying debts. Calculated by dividing total monthly debt payments by gross monthly income. While DTI does not directly affect your credit score, lenders use it heavily in underwriting decisions. Most conventional mortgage lenders prefer a DTI of 43% or less; FHA loans may allow up to 50% with compensating factors.
Default
The failure to meet the legal obligations of a loan agreement, such as not making payments. Default typically occurs after several months of missed payments (often 90-180 days depending on the loan type). Defaulting on a loan triggers severe credit score damage and may lead to collections, lawsuits, or wage garnishment.
Delinquency
A payment that is past due. Delinquencies are reported to credit bureaus in 30-day increments (30, 60, 90, 120+ days late). A single 30-day late payment can drop your credit score significantly, and the impact increases with each additional 30-day period. Delinquencies remain on your report for 7 years.
Dispute
A formal challenge to information on your credit report that you believe is inaccurate, incomplete, or unverifiable. Under Section 611 of the FCRA (15 U.S.C. § 1681i), credit bureaus must investigate your dispute within 30 days (45 days if you provide additional information). If the item cannot be verified, it must be removed.
ECOA (Equal Credit Opportunity Act)
A federal law (15 U.S.C. § 1691) that prohibits creditors from discriminating against credit applicants based on race, color, religion, national origin, sex, marital status, age, or receipt of public assistance. Under ECOA, creditors must notify you of the reasons for any adverse credit action within 30 days.
Equifax
One of the three major U.S. credit bureaus, headquartered in Atlanta, Georgia. Equifax maintains credit files on more than 200 million U.S. consumers. You can request your free Equifax credit report through AnnualCreditReport.com or dispute errors by mail at P.O. Box 740256, Atlanta, GA 30374.
Experian
One of the three major U.S. credit bureaus, headquartered in Costa Mesa, California. Experian collects and reports credit information on approximately 235 million U.S. consumers. You can dispute errors by mail at P.O. Box 4500, Allen, TX 75013, or online at experian.com/disputes.
Learn more: Writing Effective Credit Bureau Dispute Letters →
FCRA (Fair Credit Reporting Act)
The primary federal law (15 U.S.C. § 1681 et seq.) governing how consumer credit information is collected, shared, and used. The FCRA gives consumers the right to access their credit reports, dispute inaccurate information, and be notified when information in their file is used against them. It sets the framework for the entire credit reporting system.
FDCPA (Fair Debt Collection Practices Act)
A federal law (15 U.S.C. § 1692) that regulates how third-party debt collectors can interact with consumers. The FDCPA prohibits harassment, threats, deception, and unfair practices. It gives consumers the right to request debt validation, dispute debts, and demand that collectors cease communication.
FICO Score
The most widely used credit scoring model, created by Fair Isaac Corporation. FICO scores range from 300 to 850 and are used by approximately 90% of top lenders for lending decisions. The score is calculated based on five weighted factors: payment history (35%), amounts owed (30%), length of credit history (15%), credit mix (10%), and new credit (10%).
Learn more: The 5 Factors That Determine Your Credit Score →
Forbearance
A temporary agreement between a borrower and lender to reduce or pause loan payments during a period of financial hardship. Forbearance is commonly associated with mortgages and student loans. How forbearance affects your credit depends on the terms — some agreements report payments as current, while others may report them as deferred.
Foreclosure
The legal process by which a lender seizes a property after the borrower fails to make mortgage payments. A foreclosure remains on your credit report for 7 years from the date of the first missed payment that led to the foreclosure. It is one of the most damaging entries on a credit report, often causing a score drop of 100 points or more.
Fraud Alert
A notice placed on your credit report that alerts creditors to take extra steps to verify your identity before opening new accounts. Under the FCRA, you can place an initial fraud alert lasting one year by contacting any one of the three bureaus (which must notify the other two). Identity theft victims can request an extended fraud alert lasting 7 years.
Furnisher
Any entity that provides information about consumers to credit bureaus. Furnishers include banks, credit card companies, mortgage servicers, collection agencies, and other lenders. Under Section 623 of the FCRA (15 U.S.C. § 1681s-2), furnishers have a legal duty to report accurate information and investigate disputes forwarded by credit bureaus.
Garnishment
A court-ordered process that allows a creditor to collect money directly from your wages, bank account, or other income sources. Federal law limits garnishment to 25% of disposable earnings or the amount by which weekly earnings exceed 30 times the federal minimum wage, whichever is less. Some debts (taxes, child support, student loans) have different garnishment rules.
Goodwill Letter
A written request to a creditor asking them to remove a negative item from your credit report as a gesture of goodwill. Goodwill letters work best when you have an otherwise strong payment history and the late payment was an isolated incident due to a legitimate hardship. Creditors are not required to honor these requests, but many do.
Learn more: Goodwill Letters: Asking Creditors to Remove Negative Items →
Grace Period
The period between the end of a billing cycle and the payment due date during which you can pay your balance in full without incurring interest charges. The CARD Act of 2009 requires credit card issuers to provide a minimum 21-day grace period. If you carry a balance from the previous month, you may lose your grace period.
Hard Inquiry
See Credit Inquiry (Hard). A credit check initiated by a lender when you apply for credit that temporarily lowers your score. Hard inquiries remain on your report for 2 years but typically only affect your score for 12 months. FICO and VantageScore both employ rate-shopping windows that count multiple inquiries for the same loan type as a single inquiry.
HELOC (Home Equity Line of Credit)
A revolving line of credit secured by the equity in your home. HELOCs function similarly to credit cards — you can borrow up to your limit, repay, and borrow again during the draw period. Because a HELOC is secured by your home, failure to repay can result in foreclosure. HELOC balances count toward your credit utilization ratio.
Identity Theft
The fraudulent use of someone else's personal information — typically their name, Social Security number, or credit card numbers — to open accounts, make purchases, or commit other crimes. Under the FCRA, identity theft victims have enhanced rights including the ability to place extended fraud alerts, obtain free credit reports, and block fraudulent information from their reports.
Installment Loan
A loan that is repaid over time with a fixed number of scheduled payments. Common examples include auto loans, mortgages, student loans, and personal loans. Installment loans contribute to your credit mix and their payment history is reported to the credit bureaus. Unlike revolving credit, the balance decreases with each payment.
Interest Rate
The cost of borrowing money, expressed as a percentage of the loan amount. Your credit score is one of the primary factors lenders use to determine the interest rate they offer you. Borrowers with higher credit scores typically receive significantly lower interest rates — a difference that can amount to tens of thousands of dollars over the life of a mortgage or auto loan.
Learn more: Credit Score Ranges: What Is Good, Fair, and Bad? →
Investigation (Dispute Investigation)
The process a credit bureau must undertake when a consumer files a dispute. Under Section 611 of the FCRA (15 U.S.C. § 1681i), the bureau must forward your dispute to the data furnisher, the furnisher must conduct a reasonable investigation, and the bureau must report results back to you — all within 30 days (or 45 days if you submit additional information during the process).
Joint Account
A credit account shared by two or more people who are equally responsible for the debt. Both account holders' credit reports are affected by the account's payment history. Joint accounts are common between spouses. If one party fails to pay, both parties' credit scores are damaged. Removing yourself from a joint account typically requires refinancing or closing the account.
Judgment
A court order establishing that a debtor owes money to a creditor. As of 2017, the three major credit bureaus no longer include civil judgments on credit reports under the National Consumer Assistance Plan. However, judgments can still lead to wage garnishment, bank levies, and property liens that indirectly affect your financial life.
Key Derogatory
A classification used by some credit monitoring services to identify the most severely negative items on your credit report. Key derogatory items typically include collections, charge-offs, repossessions, foreclosures, bankruptcies, and tax liens. These items have the greatest negative impact on your credit score.
Late Payment
A payment received after the due date. Creditors generally report late payments to the credit bureaus once the payment is 30 or more days past due. Late payments are classified by severity: 30, 60, 90, and 120+ days late. Payment history is the single most influential factor in your credit score (35% of FICO). Late payments remain on your report for 7 years from the date of the missed payment.
Lien
A legal claim placed on your property by a creditor as security for a debt. Tax liens were removed from credit reports in 2018 under the National Consumer Assistance Plan, but other liens (such as mechanic's liens or judgment liens) can still affect your ability to sell or refinance property even if not directly reported on your credit file.
Line of Credit
A flexible borrowing arrangement that allows you to draw funds up to a preset limit, repay, and borrow again. Lines of credit can be secured (backed by collateral like a home) or unsecured. They are classified as revolving credit on your credit report and factor into your credit utilization ratio.
Medical Debt
Debt incurred for medical services. Beginning in 2022-2023, the three major credit bureaus made significant policy changes: paid medical collections are no longer reported, new medical debts have a one-year waiting period before being reported, and medical collections under $500 are excluded. These changes affect how medical debt impacts your credit score.
Method of Verification
When a credit bureau completes a dispute investigation, you have the right under Section 611(a)(7) of the FCRA (15 U.S.C. § 1681i(a)(7)) to request the method of verification — a description of the procedure used to determine the accuracy of the disputed item. This can reveal whether the bureau conducted a meaningful investigation or simply rubber-stamped the furnisher's response.
Minimum Payment
The smallest amount you must pay on a credit card or revolving account each month to keep the account in good standing. Minimum payments typically equal 1-3% of the outstanding balance or a fixed dollar amount (usually $25-35), whichever is greater. Paying only the minimum extends repayment over many years and dramatically increases total interest paid.
Mortgage
A loan used to purchase or refinance real estate, where the property serves as collateral. Mortgages are installment loans that typically span 15 to 30 years. Minimum credit score requirements vary by loan type: FHA loans generally require a 580 score for 3.5% down payment, conventional loans typically require 620, and VA loans have no official minimum score.
National Consumer Assistance Plan (NCAP)
A series of reforms agreed to by Equifax, Experian, and TransUnion in 2015 following a settlement with state attorneys general. Key changes include removing civil judgments and tax liens from credit reports (2017-2018), requiring a 180-day waiting period before reporting medical debts, and requiring collectors to furnish the original creditor name.
Negative Item
Any entry on your credit report that indicates missed payments, delinquency, or other unfavorable credit behavior. Common negative items include late payments, collections, charge-offs, bankruptcies, foreclosures, and repossessions. Most negative items remain on your credit report for 7 years (10 years for Chapter 7 bankruptcy).
Learn more: How Long Do Negative Items Stay on Your Report →
New Credit
One of the five FICO score factors, accounting for approximately 10% of your score. It considers how many new accounts you have opened recently, how many recent hard inquiries are on your report, and how long it has been since you opened a new account. Opening many new accounts in a short period signals higher risk to lenders.
Learn more: The 5 Factors That Determine Your Credit Score →
Original Creditor
The company or lender that originally extended credit to you before the account was sold or transferred to a collection agency. When disputing or validating collection debts, knowing the original creditor is important because the collector must be able to document the chain of ownership from the original creditor to themselves.
Pay-for-Delete
A negotiation strategy where you offer to pay a debt in exchange for the collector agreeing to remove the negative entry from your credit report. Pay-for-delete is not required by law and not all collectors will agree to it. If a collector does agree, get the agreement in writing before making payment. This tactic works best with smaller collection accounts.
Payment History
A record of whether you have made payments on time for all your credit accounts. Payment history is the most heavily weighted factor in your FICO score at 35%. It includes on-time payments, late payments (30/60/90/120+ days), collections, charge-offs, bankruptcies, and other payment-related items.
Learn more: The 5 Factors That Determine Your Credit Score →
Permissible Purpose
A legally valid reason for accessing your credit report, as defined under Section 604 of the FCRA (15 U.S.C. § 1681b). Permissible purposes include credit applications, insurance underwriting, employment screening (with your consent), and legitimate business transactions. Pulling your credit report without a permissible purpose is a violation of federal law.
Personal Information Section
The first section of your credit report containing identifying details such as your name (including any variations), current and previous addresses, Social Security number, date of birth, and employer information. Errors in this section — such as wrong names or addresses — can indicate mixed files or identity theft and should be disputed.
Pre-Approval
A preliminary determination by a lender that you are likely to qualify for a loan or credit card based on an initial review of your credit. Pre-approval typically involves a soft inquiry and does not guarantee final approval. Pre-qualification and pre-approval are often used interchangeably, though pre-approval generally implies a more thorough review.
Principal
The original amount of money borrowed on a loan, excluding interest and fees. As you make payments on an installment loan, the principal balance decreases. In the early stages of an amortizing loan like a mortgage, a larger portion of each payment goes toward interest, with the principal share increasing over time.
Public Record
Information from court records that may appear on your credit report. As of 2018, the only public record item still reported by the major credit bureaus is bankruptcy. Civil judgments and tax liens were removed under the National Consumer Assistance Plan due to data accuracy concerns.
Rapid Rescore
An expedited credit report update process available only through mortgage lenders during the home loan application process. A rapid rescore can update your credit report within 24 to 72 hours to reflect recent changes (such as a paid-down balance), compared to the normal 30-45 day reporting cycle. It typically costs $25-50 per account per bureau.
Rate Shopping
The practice of applying to multiple lenders within a short period to compare interest rates on a mortgage, auto loan, or student loan. Both FICO and VantageScore recognize rate shopping and count multiple inquiries for the same loan type within a 14-45 day window as a single inquiry, so your score is not penalized for comparing offers.
Reinsertion
When a credit bureau places a previously deleted item back on your credit report. Under Section 611(a)(5)(B) of the FCRA (15 U.S.C. § 1681i(a)(5)(B)), the bureau must notify you within 5 business days of reinserting an item, including the name, address, and phone number of the furnisher who requested reinsertion. You can dispute the item again if you believe it is still inaccurate.
Repossession
The seizure of property (usually a vehicle) by a lender when the borrower defaults on the loan. A repossession remains on your credit report for 7 years from the date of first delinquency. After repossession, you may still owe a deficiency balance — the difference between what was owed and what the lender recovered by selling the asset.
Revolving Credit
A type of credit that allows you to borrow repeatedly up to a set limit, repay, and borrow again. Credit cards and home equity lines of credit (HELOCs) are the most common examples. Revolving credit balances directly affect your credit utilization ratio, which accounts for 30% of your FICO score.
Secured Credit Card
A credit card that requires a cash security deposit, which typically becomes your credit limit. Secured cards are designed for people building or rebuilding credit. The deposit reduces the issuer's risk, making approval easier for those with bad or no credit. Most secured cards report to all three bureaus, helping you build a positive payment history.
Learn more: Best Secured Credit Cards for Rebuilding Credit →
Secured Debt
A loan backed by collateral — an asset that the lender can seize if you default. Mortgages (secured by real estate), auto loans (secured by the vehicle), and secured credit cards (secured by a cash deposit) are common examples. Secured debts generally carry lower interest rates than unsecured debts because the lender faces less risk.
Section 604
Section 604 of the FCRA (15 U.S.C. § 1681b) defines the permissible purposes for accessing your credit report. A credit bureau can only furnish your report to parties with a valid reason, such as evaluating a credit application, insurance underwriting, or employment screening with your written consent. Unauthorized access is a federal violation.
Section 609
Section 609 of the FCRA (15 U.S.C. § 1681g) grants consumers the right to request a full disclosure of all information in their credit file. This includes account details, inquiries, and the sources of information. Contrary to popular myth, Section 609 does not automatically require credit bureaus to delete items they cannot verify — that right comes from Section 611.
Section 611
Section 611 of the FCRA (15 U.S.C. § 1681i) establishes your right to dispute information on your credit report. It requires credit bureaus to investigate disputes within 30 days, contact the furnisher of the disputed information, and remove or modify items that cannot be verified. This is the primary legal basis for credit repair disputes.
Section 623
Section 623 of the FCRA (15 U.S.C. § 1681s-2) imposes duties on furnishers of information to credit bureaus. Furnishers must report accurate information, investigate consumer disputes forwarded by bureaus, and correct or delete information found to be inaccurate. Consumers can file direct disputes with furnishers after first disputing through the bureau.
Servicemembers Civil Relief Act (SCRA)
A federal law (50 U.S.C. § 3901 et seq.) that provides financial protections for active-duty military members. SCRA benefits include a 6% interest rate cap on pre-service debts, protection from foreclosure and repossession, and the ability to terminate certain leases and contracts. These protections can help servicemembers maintain good credit during deployments.
Short Sale
A real estate transaction where a homeowner sells their property for less than the outstanding mortgage balance, with the lender's approval. A short sale appears on your credit report and can lower your score significantly, though generally less than a foreclosure. The negative impact typically lasts 7 years from the date of the short sale.
Soft Inquiry
See Credit Inquiry (Soft). A credit report check that does not affect your score. Common examples include checking your own credit, promotional pre-approvals, and employer background checks. Soft inquiries are visible only to you on your credit report.
Statute of Limitations (SOL)
The time period during which a creditor or debt collector can file a lawsuit to collect a debt. The SOL varies by state and debt type, typically ranging from 3 to 10 years. The statute of limitations is separate from the credit reporting period — a debt can fall off your credit report but still be legally collectible, or vice versa. Making a payment on a time-barred debt may restart the SOL in some states.
Student Loan
A loan taken out to pay for higher education expenses. Federal student loans are reported to all three credit bureaus and affect your credit score through payment history and amounts owed. Defaulting on a federal student loan (after 270 days of non-payment) severely damages your credit. Rehabilitation programs can remove the default notation from your report.
Subprime
A classification for borrowers with credit scores below 620 (or sometimes below 580, depending on the lender). Subprime borrowers typically receive higher interest rates and less favorable loan terms because they are considered higher risk. Subprime auto loans and credit cards are widely available but come at a significant cost premium.
Tax Lien
A legal claim by a government entity (federal, state, or local) on your property due to unpaid taxes. Since April 2018, the three major credit bureaus no longer include tax liens on credit reports under the National Consumer Assistance Plan. However, tax liens remain a matter of public record and can still affect property transactions.
Thin File
A credit report with very few accounts or limited credit history. Consumers with thin files may have difficulty obtaining credit because lenders have insufficient data to assess their risk. Building credit through secured cards, credit builder loans, or authorized user status can help thicken a thin file over time.
TILA (Truth in Lending Act)
A federal law (15 U.S.C. § 1601 et seq.) that requires lenders to clearly disclose the terms and costs of credit to consumers before they enter into a loan agreement. Key disclosures include the APR, total finance charges, payment schedule, and total amount to be repaid. TILA aims to help consumers compare credit offers and make informed borrowing decisions.
Trade Line
Any credit account listed on your credit report. Each trade line includes the creditor name, account type, balance, credit limit, payment history, date opened, and account status. Your credit score is largely determined by the information contained in your trade lines. The term is industry jargon for what consumers typically call a "credit account."
TransUnion
One of the three major U.S. credit bureaus, headquartered in Chicago, Illinois. TransUnion maintains credit records on approximately 200 million U.S. consumers. You can dispute errors by mail at P.O. Box 2000, Chester, PA 19016, or online at transunion.com/dispute.
Learn more: Writing Effective Credit Bureau Dispute Letters →
Unsecured Debt
Debt that is not backed by collateral. Credit cards, medical bills, personal loans (without collateral), and student loans are common examples of unsecured debt. Because unsecured debt carries more risk for the lender (there is no asset to seize), it typically comes with higher interest rates than secured debt.
Utilization Ratio
See Credit Utilization. The percentage of your available revolving credit that you are currently using. Calculated by dividing your total credit card balances by your total credit limits. For optimal credit scores, aim to keep your utilization ratio below 10% on both individual cards and across all revolving accounts combined.
VantageScore
A credit scoring model created jointly by the three major credit bureaus (Equifax, Experian, and TransUnion) as a competitor to FICO. VantageScore 3.0 and 4.0 use the 300-850 range. VantageScore weights factors slightly differently than FICO and can generate a score with as little as one month of credit history, making it more accessible for people with thin credit files.
Verification of Debt
The documentation a debt collector must provide when you request debt validation under the FDCPA. At minimum, the collector must provide the amount of the debt, the name of the original creditor, and a statement that you have 30 days to dispute the debt. A thorough verification should also include account statements, the signed original agreement, and documentation of the chain of ownership.
Wage Garnishment
See Garnishment. A court-ordered deduction from your paycheck to pay a debt. Federal law generally limits garnishment to 25% of disposable earnings. Different limits apply for child support, alimony, student loans, and tax debts.
Zombie Debt
Old debt that is past the statute of limitations or has already been discharged in bankruptcy but is revived by a new collection agency attempting to collect on it. Making any payment on zombie debt may restart the statute of limitations in some states. Consumers should verify the validity and legal status of any old debt before making payment.
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