The Core Players
This term represents the original "sticker price" of a loan, which must be paid down to zero to stop interest from accruing.
Principal
This type of credit is unique because you consume the product first (like WiFi or Water) and pay for the usage 30 days later.
Service Credit
If a borrower with a perfect score misses just one payment by 30 days, their score can drop by up to 100 points. Which 35% factor causes this massive hit?
Payment History
Even if you have zero debt and millions in cash, it is mathematically impossible to exceed this maximum credit score.
850
This is the smallest payment allowed by law to keep an account "current," though it maximizes the lender's profit.
Minimum Payment.
In a legal credit contract, this party assumes the "Default Risk" in exchange for the potential to earn profit via interest.
Lender
This "Revolving" credit type has no set end date and allows you to spend, pay, and spend again up to a limit.
Open Credit
A student has a total credit limit of $2,000 across two cards. They currently owe $1,400. What is their Credit Utilization percentage, and is it considered "healthy"?
70% (Unhealthy)
A lender sees a 610 score and labels the borrower "Subprime." This score falls into what general health category?
Poor (Subprime)
This is the legal status of a loan once the contract is officially broken and the borrower stops making payments.
Default.
This is the "Opportunity Cost" of borrowing; the specific fee you pay for the privilege of using someone else’s capital
Interest
This "Closed-End" credit type requires a fixed monthly payment for a set number of months (e.g., 60 months for a car).
Installment Credit
A senior is told to never close their first credit card account, even if they don't use it, to protect this 15% factor. Why does this matter?
Length of Credit History
ou find a "Charge-Off" on your report for an account you didn't open. What crime likely occurred?
Identity Theft.
After 120+ days of non-payment, a lender sells your debt to this type of aggressive third-party agency.
Collections.
In the formula Total Cost = Principal + X, what does "X" represent in terms of the lender's revenue?
Interest
Because they involve massive principal amounts and 15–30 year timelines, these are the most common Installment loans.
Mortgage
Applying for a car loan, a student loan, and three retail credit cards in a single month results in multiple "Hard Inquiries." Which 10% factor is being damaged?
New Credit
Two people have a 700 score, but one has a 10-year history and the other has 1 year. Which one is the "Safer" bet?
The 10-year history
According to federal law, negative marks like collections or defaults must vanish from your report after this many years.
7 Years.
If you pay only the interest on a loan every month, what happens to the Principal balance?
It stays exactly the same.
Unlike revolving credit cards, this type of service-based credit usually results in immediate shut-off if not paid in full.
Service Credit
To achieve a "Perfect 850," a borrower usually needs to show they can handle both Revolving and Installment debt simultaneously. This describes what final 10% factor?
Credit Mix
Many luxury landlords and high-level employers require a score in this 720+ range just to qualify for an interview.
Excellent (Prime).
The most dangerous legal habit: protecting someone else’s debt with your own reputation by signing their contract.
Co-signing.