Credit Vocab
A three-digit number (ranging from 300-850) based on an individual's credit history detailed in a credit report
Credit Score
A loan taken by individuals and businesses to make real estate purchases without paying the entire value of the purchase up front.
Mortgage
A budgeting method that allocates 50% to needs, 30% to wants, and 20% to savings and debt repayment
50/30/20 Rule
Total earnings before any deductions are taken.
Gross Pay
Something, typically money, that you owe to a person or a business.
Debt
The cost you pay each year to borrow money, including fees, expressed as a percentage
APR
Debt tied to a specific tangible asset that can be used as collateral and repossessed if payments are not made.
secured debt
A budgeting method where money for monthly spending is taken out in cash and placed in labeled envelopes according to budget categories. Spending occurs only from the corresponding envelopes.
Cash Envelope Budget
A cost that appears irregularly or that changes in amount (e.g., utility bills)
Variable Expense
A consumer-reporting company that collects and sells information about how individual people manage their credit (e.g. Equifax)
Credit Bureau
A document with information about a person’s credit activity and history
Credit Report
A small loan, offered through a business, lent at a high interest rate, and meant to be paid as soon as you receive your next paycheck.
Payday Loan
A strategy where you save a specified amount of your paycheck before doing anything with the rest of your money
Pay Yourself First
Give two examples of fixed expenses.
Rent, Car Payment, Insurance, etc.
A measurement of your outstanding debt divided by your total available credit; a general rule of thumb is to keep this under 30%
Credit Utilization Rate
A credit card service that allows cardholders to withdraw a certain amount of cash, either through an ATM or directly from a bank, typically at a high interest rate or for a fee
Cash Advance
Original amount of money borrowed, separate from interest or fees.
principal
A budgeting method where every anticipated earning is assigned a role to be spent, saved, or invested somewhere, so there's no "leftover" money with no purpose
Zero-Based Budget
The basic services your home, apartment, or business needs to keep it comfortable and functioning properly (e.g. water, electricity, etc.)
Utilities
A method of debt repayment whereby the borrower prioritizes paying down debts with the highest interest rates first
Avalanche or High Rate Method
A person who has permission to use and/or carry another person's credit card, but isn't legally responsible for paying the bill
Authorized User
The paying off of debt over time in equal installments; part of each payment goes toward the loan principal while the other part goes toward interest
amortization
When your expenses exceed your income.
Deficit
The cost for one item or measurement that allows it to be easily compared to other similar products to evaluate which is a better deal
Unit Price
A method of debt repayment whereby the borrower prioritizes paying down debts with the smallest balances first
Debt Snowball Method