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WHAT DOES THAT MEAN?
TERM DEFINITION annual percentage rate “APR”; the total of what a loan costs the borrower each year, expressed as a percentage of the loan amount. capital money that can be used to produce or acquire things of value. credit the ability to obtain goods or services immediately by promising to pay for them later. creditor the person or business that provides money for a loan. collections activities by a debt collection agency to recover money owed. consumer debt debt incurred for the purchase of goods or services primarily for personal or household purposes which goods or services lose value over time. consumerism economic theory that the consumption of goods and services in large quantities is beneficial to a country’s economy. credit bureau an independent company that records and shares information about the creditworthiness of consumers who want to borrow money. credit report a report detailing a person’s bill paying history, total debts and bankruptcy history used by a potential creditor to evaluate a loan applicant’s creditworthiness. crowdlending loans made via online platforms that connect people who need money with investors who have money to lend; also called peer-to-peer lending. debt a sum of borrowed money which must be paid back. debt to income (DTI) ratio the amount of debt a person has compared to their overall income. FICO ® credit score a measure of creditworthiness based on a data analysis method invented by the Fair Isaac Corporation (FICO). financing to obtain a loan for a business purchase or personal purchase. government guaranteed debt a loan that will be repaid by the government if the debtor fails to repay it. interest a fee paid for the use of someone else’s money, expressed as a percentage rate. non-consumer debt debt incurred as an investment in things that build wealth or increase in value over time. purchasing power the financial ability to buy products and services. principal balance the amount of loan remaining unpaid, not including interest and other charges. wage garnishment an order from a court or a government agency requiring an employer to deduct money from an employee’s paycheck to satisfy a debt. PRODUCT PREVIEW
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Chapter 7 | The Credit Conundrum 116
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