Gnomenclature

A certificate of deposit is a type of deposit account designed to hold money for a specific amount of time. By committing your money for a predetermined period, you may be able to earn a higher rate of interest. However, you are also likely to face an early withdrawal penalty if you take money out before the CD term has expired.

Charge-off is the portion of an unpaid debt which a creditor has given up trying to collect. However, just because the creditor has written it off doesn’t mean you are off the hook. You are still legally responsible for that debt until the statute of limitations expires, and it will remain on your credit report for a long time.

Check-kiting is a term that describes an illegal practice of taking advantage of the fact that it takes checks a few days to clear in order to use the money in the interim. It involves deliberately writing a check for more money than you have in the account so you can temporarily use that money before ultimately replacing it in the account. This is different from an overdraft because it is done deliberately as a means of fraudulently using funds you don’t have.

Closing costs are expenses involved in the purchase of a property that must be paid upon legally completing the transaction. Both buyers and sellers may be subject to closing costs. Those costs may include a variety of fees, initial insurance premiums, property taxes, agent commissions and transfer taxes. An important part of buying a home is to make sure to have enough money available for closing costs at the time of purchase.

Collection accounts are unpaid accounts a creditor has had to refer to a collection agency. These are included in your credit record. Collection accounts are a red flag to potential lenders and a negative factor in credit scores.

Collision insurance is a type of auto insurance that covers you for damage to your vehicle in the event of an accident. This is typically subject to a deductible and limits on the insured amount. Also, collision insurance does not protect you from other types of damage or loss, such as vandalism or theft.

Comprehensive insurance is auto insurance that covers you from non-collision events beyond your control, such as theft, vandalism, windshield and other glass damage, fire, collisions with animals and damage due to severe weather. The coverage may be subject to deductibles and limits.

A conforming or non-conforming mortgage describes whether a home loan meets standards set by the Federal Housing Finance Agency. Those standards cover the size of the loan, the amount of the down payment and the pace of repayment.

Conforming mortgages are eligible for purchase by Fannie Mae and Freddie Mac, which helps lenders spread their risk and obtain more funds to make loans. Because non-conforming loans cannot be sold to Fannie Mae or Freddie Mac, lenders typically charge higher interest rates for them.

Cost of attendance is the total expense incurred by attending school. It may include tuition as well as room and board, transportation, and supplies. When planning to attend college or any other school, it is important to budget for the full cost of attendance beyond just tuition.

Cost of living is the amount of money necessary to meet a household’s lifestyle. Cost of living is very important for long-term financial planning. The cost of living can generally be expected to rise over time. Also, retirement expenses may be very different from non-retirement expenses and may also vary greatly through different stages of retirement.

Credit invisibility means you do not have enough of a credit record for a credit score to be calculated. New users to credit or people who haven’t used credit in a long time often face the problem of trying to establish credit without any kind of credit record.

Credit tiers are grouping of customers according to credit score. People with higher scores have a greater likelihood of having their applications approved and generally pay lower interest rates. Consumers are generally grouped together according to different ranges of scores. Lenders may use different score ranges to determine credit tiers but, as an example, scores over 800 would represent the top tier, scores from 720 to 800 the next-best tier, 670 to 720 the next, and so on. These tiers mean that a matter of a few points can make a big difference, if you happen to fall near the bottom or the top of a particular tier.

Credit utilization is the amount of your available credit that is currently in use. It is often expressed as a percentage. Another name for it is "balance-to-limit ratio."

If you have three credit cards with credit limits totaling $10,000 and balances totaling $3,000, your credit utilization would be 30%. Credit utilization is a factor in calculating credit scores, with high credit utilization being a negative factor.