Reference

Glossary

Every term we use, defined once in plain words. No jargon for its own sake.

Jump to

Credit basics

APR: The yearly cost of borrowing, shown as a percent. It rolls interest and fees into one number. See how to read an APR.
Credit score: A number lenders use to judge how you handle credit. Payment history is the biggest part.
Credit bureau: A company that keeps your credit file. The three main ones are Equifax, Experian, and TransUnion.
Payment history: Your record of paying on time. It's the largest part of a credit score.
Credit utilization: How much of your card limits you're using. Lower is better for your score.
Thin file: Little or no credit history yet — not enough for a score. A credit-builder loan can start one.
Delinquent: Behind on a payment — usually 30 or more days late. It's reported and lowers your score.
Secured card: A credit card backed by a refundable deposit. See secured cards.
Credit-builder loan: A loan you pay first and receive at the end. It builds payment history. See credit-builder loans.
Hard inquiry: A lender's credit check when you apply. It can dip your score a little for a while.

Earned wage access: Taking pay you've already earned, a few days early. See earned wage access.
Cash advance: A small, short-term advance against your next paycheck or earned pay, usually for a fee.
Overdraft fee: A charge for spending more than your balance. Fee-free banking avoids it.
Payday loan: A short-term, high-cost loan due on your next payday. See payday loans.
Rollover: Extending a payday loan for another fee when you can't repay it. It's how the cost piles up.

Debt management plan (DMP): A plan through a nonprofit counselor: one monthly payment, often at lower rates. See credit counseling.
Debt consolidation: Combining debts into one loan or card, ideally at a lower rate. See consolidation.
Debt settlement: Paying a lender less than you owe to close the debt. See debt settlement.
Forgiven debt: The part of a debt a lender writes off. The IRS usually treats it as taxable income.
Secured vs. unsecured debt: Secured debt is backed by property (a car or house). Unsecured debt isn't (cards, medical bills).
Chapter 7 / Chapter 13: The two common consumer bankruptcies: Chapter 7 clears most unsecured debt; Chapter 13 sets a repayment plan. See bankruptcy.
Automatic stay: A court order in bankruptcy that pauses collection calls and most lawsuits right away.

Equity: Your home's value minus what you still owe on it. It's the part you own outright.
HELOC: A revolving line of credit against your home, usually at a variable rate. See HELOCs.
Home equity loan: A fixed-rate lump sum against your home, repaid on a set schedule. See home equity loans.
Cash-out refinance: Replacing your mortgage with a bigger one and taking the difference in cash. See cash-out refinance.
Home equity investment (HEI): Cash now for a share of your home's future value, with no monthly payment. See HEIs.
Balloon payment: A large lump sum due at the end of a term. It can force a sale if you can't cover it.
Collateral: Property a lender can take if you don't repay — like the home behind a HELOC.