Glossary of credit and debt terms
Plain definitions for the words these guides use. None of them is an offer for a loan or a card.
- APR
The annual percentage rate is the disclosed yearly price of credit, not the monthly interest charge by itself.
- Charge-off
A charge-off is the creditor’s accounting step when it writes a delinquent balance off as a loss. The debt can still be owed.
- Credit freeze
A freeze limits most new-credit access to your file at a bureau. It does not delete what is already in the file.
- Credit utilization
Utilization is a reported balance divided by the credit limit. Scoring models see the reported figure.
- Debt avalanche
Avalanche sends extra money to the highest APR first. It is an interest order, not a score strategy.
- Debt snowball
Snowball sends extra money to the smallest balance first. It closes an account sooner and usually pays more interest.
- Fair Credit Reporting Act
The FCRA is the federal statute for consumer reporting files, including disclosure, disputes, and how long most negatives may appear.
- FICO Score 8
FICO Score 8 is one widely sold scoring model. Lenders often buy a different version than the one a consumer app shows.
- Grace period
A grace period is a contract window in which purchase interest is waived if you pay the statement balance in full.
- Minimum payment
The minimum is the contractual amount due. If it does not cover interest, the balance grows.
- Statement closing date
The closing date ends a billing cycle and fixes the statement balance. It is not the payment due date.
- Statute of limitations
A statute of limitations is the local deadline to sue. It is not the same as how long an item stays on a credit report.