Glossary of Credit Monitoring

Terms & Definitions

Why is credit monitoring so important? The obvious reason is to ensure you have a clean credit file, however there is another reason called identity theft. Almost 10 million Americans fell victim to this crime last year and preventing it requires ongoing vigilance.

To be vigilant requires that you not only monitor your credit file, it also requires you to understand what you are looking at in order to spot potential problems before they become real or get out of hand. The 'ounce of preventions' adage surely applies here. This glossary should assist you to understand the terminology you will encounter when monitoring your credit report information and securing yourself against identity theft.

Account condition
Each account on your credit report has an account condition, which shows the present state of the account (current, past due, etc.), but doesn’t indicate the payment history of the account.

Account monitoring
Once lenders make a decision to lend you money, they might want to review your credit report on a regular basis as they continue to manage their financial risk. This monitoring, called account monitoring, scans credit reports for certain risk characteristics as defined by the lender.

Authorized account user
An authorized account user is a person permitted by a credit cardholder to charge goods and services on the cardholder's account. The cardholder is responsible for charges made by an authorized user.

Collection account
A collection account is one that’s been transferred from a routine debt to the collection department of the creditor’s company, or to a separate professional debt collecting firm, called a collection agency.

Consumer Reporting Act/Fair Credit Reporting Act
These are government acts that allow consumers to find out what information Credit Reporting Agencies (CRAs) have on file about them, and to dispute inaccurate information in the file. They also establish consumer credit rights, and outline and control the actions of the credit bureaus. [ Fair Credit Reporting Act &  Gramm Leach Bliley Act ]

Consumer Credit Counseling
Consumer credit counseling services are offered by organizations that help consumers find a way to repay debts through careful budgeting and management of funds. They’re usually non-profit, funded by creditors.

Co-signer
A co-signer is the person who signs a promissory note, along with the borrower, and is responsible for repaying the debt if the borrower defaults.

Credit
Credit is a trust or promise to pay later for goods or services purchased today.

Credit availability
Credit availability is the amount of credit you have remaining on your credit account, determined by subtracting your credit balance from your credit limit.

Credit grantor
A credit grantor is a person or business who provides consumer goods and/or services on credit.

Credit history
Your credit history is a record of how you’ve paid your credit accounts in the past. It’s used as a guide to determine whether you’re likely to pay your accounts on time in the future.

Credit investigation
A credit investigation is the process a CRA goes through in order to verify credit report information disputed by a consumer. The credit grantor who supplied the information will be contacted to verify the disputed information. If the information is verified, it remains on the report. If not, the information is deleted or corrected.

Credit repair companies
Credit repair companies have the skills, knowledge and time to dispute negative information on your credit report. They can legally clean up or erase your bad credit information and give you a new credit start.

Credit report
Your credit report is a record or file given to a prospective lender, landlord or employer, showing your financial standing and history. It’s purpose is to show your creditworthiness.

Credit Reporting Agency (CRA)
Credit bureaus are credit reporting companies, also know as CRAs. They gather files and sell information to creditors, landlords and/or employers to help them make decisions on whether to give you credit or hire you.

Credit score
A credit score is a number that reflects your credit risk level, as determined by the CRA. A higher number indicates lower risk. Its determined through statistical models that use your past credit behavior and current credit relationships to predict likely future behavior.

Default
Default refers to the failure of a debtor to make loan repayments as agreed to in a loan contract.

Disclosure
Disclosure refers to a credit report given to the consumer which shows what’s in their credit records as outlined by the FCRA (Fair Credit Reporting Act).

Flagging an account
Flagging an account identifies it for a specific purpose or reason and temporarily suspends activity on the account until the problem that caused it to be flagged is resolved.

Garnishment
Garnishment is a legal process that grants a creditor a judgment on a debt, providing for full or partial payment by seizure of a portion of a debtor’s assets, like their wages, bank account, etc.

Grace period
The grace period is the time allowed to avoid any finance charges by paying off the balance in full before the due date.

High risk
High risk consumers have delinquencies, bankruptcies, charge-offs or public record items on their credit report. This indicates to lenders that a consumer has been an irresponsible user of credit, and will likely be so in the future. High risk consumers may only be able to get credit with very high interest rates, if at all.

Identity theft
Identity theft is a form of fraud in which a consumer's financial information is illegally acquired for the purpose of making unauthorized purchases and transactions with their credit cards, or with funds from their checking or savings accounts.

Inquiry
There are two types of inquiry. A hard inquiry is when you’ve applied for credit, which gives a lender permission to pull your credit report. All hard inquiries are available for all credit grantors to review. A soft inquiry is only available for you to see, and it doesn’t influence your credit score.

Interest
Interest refers to the cost of borrowing or lending money, usually expressed as a percentage of the amount borrowed or loaned.

Item-specific statement
On your credit report you have the right to offer an explanation about a particular account or public record item. Only one item-specific statement may be added to an item.

Judgment
A judgment is an official court decision in matter of money and debts owed, that can be listed on a credit report.

Low risk
Low risk consumers have paid their bills on time, held their credit accounts for several years, and don’t have large outstanding balances, thus proving to lenders that they’re responsible, prudent users of credit. Low risk consumers can obtain credit quickly at the most favorable interest rates.

Notice of results
If you’ve requested an investigation of information on your credit report, you're entitled to receive a Notice of Results if your information was updated or deleted. You can request that the credit bureau send the corrected information to credit grantors and employers who reviewed your information within a specific period of time.

Obsolescence
Obsolescence refers to how long negative information should stay in a credit file before it’s no longer considered relevant to the credit granting decision. The FCRA has determined the obsolescence period to be 10 years in the case of bankruptcy and 7 years in all other instances.

Permissible purposes
Permissible purposes are the only reasons you can request a copy of your credit report.

Public record
Public records are information obtained by the CRA from court records, such as liens, bankruptcy filings and judgments. They’re open to any person who requests them.

Thin file
A thin file is a credit report that has few, if any, credit accounts or inquiry history. Young adults and people new to the country will typically have thin files until they begin to establish credit.

Trade line
Each specific credit relationship with a business is tracked over time as a tradeline on your credit report. This means that you can have multiple accounts with the same bank, but your payment history will be identified separately for each account. Tradeline information on your credit report includes company, date account was opened, credit limit, type of account, balance owed and payment profile.

Victim statement
A victim statement can be added to a consumer's credit report to alert credit grantors that the consumer's identification has been used fraudulently to obtain credit. The statement requests the credit grantor verbally contact the consumer by telephone before issuing credit. It remains on file for 7 years unless the consumer requests it be removed.

This Glossary of Credit Monitoring Terms and Definitions is offered as a learning tool and is not meant to analyze or interpret any individual financial situation.

For more information on Consumer Credit Counseling, or to choose from a variety of related products and services, choose from the following: