About Credit Karma

401(k) plan

A tax-deferred retirement savings account that allows employees to contribute a fixed amount of their income until withdrawn.

A retirement plan made available by a company to its employees, featuring tax-deferred contributions and growth. The plan may also include matching contributions by the company.

A

Access Card

A plastic card you use to access the money in your account, in this case your HELOC.

Add-on

Something extra you can purchase to enhance your vehicle.

Adjusted balance

A method of calculating interest which is obtained by using the ending balance from the last billing period less all payments made during the current period.

Adjustable rate mortgages (ARMs)

A mortgage in which the rate of interest adjusts based on an independently set index.

Administration fee

A fee imposed to cover the administrative portion of settling a loan.

Affinity cards

A co-branded credit card issued by a credit card marketer on behalf of a membership group which offers its members incentives to use the card.

Affordability calculator

One of many calculators on the Internet which estimates how much loan a person can afford to borrow.

Agent fee(s)

A fee imposed by the real estate agent for providing the buyer with realty services.

Amortization

A timetable for the gradual repayment of a mortgage loan.

Annual fee

A flat fee charged by the credit card company which allows a borrower to use their card.

Annual Percentage Rate (APR)

The APR includes both your interest and any additional costs or prepaid finance charges you might pay. It represents the total cost of credit on a yearly basis after all charges are taken into consideration.

The interest rate reflecting the total yearly cost of the interest on a loan, expressed as a percentage rate. It includes interest as well as other charges. Because all lenders follow the same rules to ensure the accuracy of the annual percentage rate, it provides consumers with a good basis for comparing credit cards.

The Annual Percentage Rate refers to the actual cost of a loan including the rate, points, insurance, and any other related fees (not including credit reports or appraisal charges.)

Annual fee

An annual charge imposed by the lender for maintaining a loan.

Application fee

A fee charged by the lender to cover the origination cost, or any upfront fees, of the loan.

Appraisal

The estimate of a property's value performed by an appraiser on a specific date.

Appraisal fee

The fee an appraiser charges to assess the property value of a property.

Appreciation

The increase in value of a home over time.

Automated Teller Machine (ATM)

An electronic banking machine that dispenses cash, accepts deposits, and performs other services.

Auto loan

Money borrowed from a financial institution to help you pay for your purchase of an automobile.

Average Daily Balance (ADB)

A method of calculating interest which is obtained by taking the daily balance of each day in a billing period, less any payments received, divided by the number of days in the period.

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B

Balloon

A final lump sum mortgage payment due in full after a set period of time.

Balance transfer

The credit card balance amount that gets transferred from one outstanding credit card to another.

Beneficiary

The individual, institution, trustee, or estate which receives, or may become eligible to receive, benefits, under a will, retirement plan, or other contract.

Better Business Bureau (BBB)

A nationwide organization supported by businesses who investigate customer complaints regarding dishonest businesses.

Billing cycle

The number of days used to calculate interest for that specific billing period. Also referred to as the billing period.

Borrower

A person who borrows money. Also referred to as a consumer.

Broker(s)

An intermediary between a borrower and a lender.

Buyer

The person buying a piece of property.

Buyer(s) agent

The real estate agent who represents the buyer in a sales transaction.

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C

Cap

A limit on how much the variable interest rate can increase annually or during the life of the line of credit.

Carry-back mortgage

A financing arrangement where the seller holds a second trust deed or mortgage on the property to allow the buyer to buy the property.

Cash

Money in the form of paper currency or coins.

Cash advance

Cash borrowed against your credit card balance. The cash advance limit may be lower than your credit limit.

Cash-back incentives (rebates)

A form of reward issued as a rebate check or statement credit by the creditor to the borrower.

Catch-up contribution

Contributions that workers over 50 are permitted to make, which have a higher maximum contribution limit than normal.

Closing cost(s)

All expenses related to funding a home equity loan or home equity line of credit.

All expenses related to transferring home ownership from the seller to the buyer.

Commission

The amount a real estate broker earns (usually 3-6% of the sales price of a home) for selling a home.

Constant Maturity Treasury (CMT)

A common index rate which changes weekly that many mortgages are tied to.

Construction cost(s)

The amount it costs to finance the construction of a property.

Contribution

A payment made to an annuity or retirement plan.

Convenience check

Checks issued by a creditor for the borrower to use against their credit line.

Convenience check fee

A fee charged by the creditor for using a convenience check against one's account.

Conversion fee

The fee charged to convert an adjustable rate mortgage to a fixed-rate loan.

Credit history

A record of a borrower's past financial behavior, including loans and other credit.

A borrower's record of past payment history.

Credit limit

See credit line.

Credit line

The maximum amount that can be charged or accessed on a credit card. Also referred to as the credit limit.

Credit report

A detailed summary of your borrowing history.

A comprehensive report issued by a credit reporting agency which profile's a borrower's credit history.

Credit reporting bureau

One of the three major reporting bureaus (Equifax®, TransUnion®, Experian®) which tracks a borrower's credit history.

Credit report

A comprehensive report issued by a credit reporting agency which profiles a borrower's credit history.

Credit score(s)

A statistical method that lenders use to quickly and objectively assess the credit risk of a loan applicant.

Credit union

A non-profit, cooperative organization which gives its members access to low-cost loans.

Creditworthiness

A creditor's measure of an individual's or company's ability to meet debt obligations.

Creditor

The credit card company or lender issuing the credit card.

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D

Daily periodic rate

This is the rate that would be used to calculate your monthly finance charge which is obtained by taking the APR divided by the number of days in the year (365).

Debt ratio(s)

A measure of a borrower's ability to repay a loan. Also referred to as debt-to-income ratio.

Default

Failure to make required payments or otherwise meet the terms of a credit agreement.

Default rate (APR)

The APR a borrower is charged for defaulting on a payment.

Delinquency(ies)

A failure by the borrower to make a payment by the specified due date.

Depreciation

The rate at which your car loses its value over time.

Deregulation

The removal of government regulatory controls from an industry, commodity, etc.

Discount broker

A broker who discount his/her commission fees to buy or sell your property.

Distribution

A payment made from a retirement plan to the account owner.

Document preparation

The process of preparing closing documents for a mortgage.

Down payment

The down payment is the amount of your auto's purchase price you supply up front in cash to get your loan.

The amount a buyer pays in cash for a home.

Draw Period

The timeframe when you can withdraw money from a Home Equity Line of Credit.

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E

Earnings

The money earned in your IRA as it grows from year to year, as distinct from any contributions that you've made to it.

Educational IRA

Also known as the Coverdell Education Savings Account, it is a nondeductible account that features tax-free withdrawals for a child's education expenses.

Employer and Employee Association Trust Account (Group IRA)

An IRA set up by employers, unions, and other employee associations for employees or members.

Equity

The current market value of a property minus any outstanding loans or liens.

Escrow

Funds held by a third-party account which are paid-out once certain conditions are met.

Escrow agent

The person or company which handles the distribution of escrow funds.

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F

FACT Act

The Fair and Accurate Credit Transactions Act passed by Congress in 2003, which entitles a consumer to receive a free copy of their credit report annually from the three main credit reporting agencies.

FCRA

The Fair Credit Reporting Act which took effect in 1971 requires Consumer Reporting Agencies to furnish correct and complete information to businesses wanting to evaluate a borrower's credit.

Fair Isaac Corporation® (FICO®)

The company that developed the FICO® credit score, which is used to judge a borrower's creditworthiness.

Fannie Mae (FNMA)

The Federal National Mortgage Association is a public company that operates under a federal charter. As the nation's largest source of financing for home mortgages, Fannie Mae does not lend money directly to consumers, but instead works to ensure that mortgage funds are available and affordable, by purchasing mortgage loans from institutions that lend directly to consumers.

Federal Deposit Insurance Corporation (FDIC)

A federal agency that insures deposits in member financial institutions up to $100,000 per depositor and $250,000 for IRAs.

Federal Housing Administration (FHA)

The Federal Housing Administration is a United States government agency which insures loans made by approved lenders to qualified borrowers, in accordance with its regulations.

Federal Trade Commission (FTC)

Independent agency of the U.S. government, established in 1915, charged with keeping American business competition fair and working in the consumer's best interest.

Fee

See service fees.

FICO® Score

A credit score developed by the Fair Issac Corporation used to determine a borrower's level of risk.

Financing

A general term that refers to a method by which you borrow money in order to pay for something, such as a car.

Finance charges

The amount a borrower is charged expressed as a percentage of the APR for carrying a month-to-month balance.

Interest or other charges paid by a borrower on a revolving mortgage loan.

Fire insurance

Insurance covering a borrower's home from fire damage.

Fixed interest rate

An interest rate that remains the same during the duration of the term (e.g. 12-month fixed IRA).

Fixed rate (APR)

A set annual percentage rate that doesn't fluctuate like a variable rate.

Fixed rate loan

A fixed interest rate loan, or installment loan, that does not change or adjust during the course of the loan.

A fixed interest rate mortgage which doesn't change or adjust during the course of the loan.

Flat fee

A set management fee which doesn't change or fluctuate.

Flood certificate

Insurance coverage for homes that are in known flood areas.

Freddie Mac

The Federal Home Loan Mortgage Corporation, also known as Freddie Mac, is a congressionally chartered institution that buys mortgages from lenders and resells them as securities on the secondary mortgage market.

Frequent flyer miles

Flight miles that are rewarded by an airline to customers for flying with them.

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G

Generation X

In general, the generation of people who were born in the 1960s and 1970s.

Generation Y

In general, the generation of people who were born in the 1980s and 1990s.

Government loan

A mortgage that is insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA). Mortgages that are not government loans are classified as conventional loans.

Grace period

The period of time a borrower is allowed to make a credit card payment without incurring any interest charges.

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H

HR 10 Plan (Keogh Plan)

A tax-deferred retirement savings plan for self-employed individuals.

Hard inquiry

A request by a creditor to see your report which gets triggered by a credit application and gets noted in the inquiries section of the report.

Hazard insurance

Insurance covering a borrower's home against hazards.

Home builder(s)

A construction company or general contractor who builds homes.

Home equity loan (HEL)

A fixed rate loan, or installment loan, in which your home serves as collateral.

Home Equity Line of Credit (HELOC)

A form of revolving credit in which your home serves as collateral.

Home improvement

Any interior or exterior projects which improve the overall appearance of an existing home.

Homeowner's association fees

Fees paid by homeowners who live in a common property development and share amenities like grounds maintenance, swimming pool upkeep, use of the community room, etc.

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I

Identity theft

A crime where a thief obtains key personal information to impersonate someone else.

Index

A published cost of money measurement that lenders use to calculate the rate on a mortgage (e.g., T-bill, LIBOR, CMT.)

Individual retirement account (IRA)

An account for the purpose of saving up for retirement that provides tax-advantages to the account-holder. The two most common types are the Traditional IRA and the Roth IRA.

Individual retirement annuity

An IRA set up with a life insurance company through the purchase of a special annuity contract.

Inflation

A general rise in prices measured against a standard level of purchasing power.

Inherited IRA

An IRA acquired by the non-spousal beneficiary of a deceased IRA owner.

Insurance

Coverage against unforeseen property losses in exchange for premiums paid.

Internet

A global communication network that allows computers worldwide to connect and exchange information.

Interest

The amount charged to borrow money.

Interest-only

The monthly payment amount owed to a lender which covers the interest-only portion of the amount borrowed. Your equity does not increase with this type of loan since you are not paying down the principal.

Interest rate

(Auto Loan) - The cost the lender charges the borrower for using their money; expressed as a percentage.

(Credit) - The yearly price charged by a lender to a borrower in order for the borrower to obtain a loan. This is usually expressed as a percentage of the total amount loaned.

(Home Equity) - A rate that is charged or paid for the exchange to borrow money.

The percent charged or paid for the use of money.

Internal Revenue Code

The main body of domestic statutory tax law of the United States organized topically, including laws covering the income tax, payroll taxes, gift taxes, estate taxes and statutory excise taxes.

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K

Keogh Plan (HR 10 Plan)

A tax-deferred retirement savings plan for self-employed individuals.

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L

Late payment

A failure to deliver a payment from the borrower before the payment due date.

Late payment fee

A penalty fee that is imposed when a borrower's payment is received late.

Lawyer

A person whose profession involves giving legal advice.

Lease

A contract between a lessor and a lessee for the use of an auto or other property, subject to stated terms and limitations, for a specified period and at a specified payment. With a lease, you do not own the vehicle.

An agreement which specifies the terms for occupying a property.

Lease buyout

The optional purchase of the vehicle when your lease term has ended.

Lease option

An agreement which allows a borrower to purchase a property which is being leased from the lender.

Lender(s)

A person or company which lends money to borrowers.

Lien(s)

A legal claim against a property that must be paid off when the property is sold before the title transfer can occur.

Lifetime cap

The maximum interest rate on an adjustable rate mortgage that may be charged at any time over the life of the mortgage.

Loan-to-value (LTV) ratio

The amount of a mortgage loan divided by the appraised value or sales price.

Loan officer

The person at a lending institution who solicits loans, acts as the representative for the lending institution, and represents the borrower at the lending institution.

Lock(ed)-in

A quoted rate guaranteed by a lender for a specified period of time even if rates go up or down during the lock-in period.

London Interbank Offering Rate (LIBOR)

An index used to determine interest rate changes for certain ARM plans, based on the average interest rate at which international banks lend to or borrow funds.

Low-interest

A special rate which may be lower than the national average and for a specified period of time.

Low introductory rate

A special promotional rate that creditors charge on purchases or balance transfers for opening a new account.

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M

Margin

The difference between the interest rate and the index on a loan.

The difference between the interest rate and the index on an adjustable rate mortgage.

Market price

The price a property would be worth on the open market.

Mileage limit

The maximum amount of miles that you are allocated under a lease before incurring penalties.

Mileage points

The amount of points rewarded by an airline for traveling a specified flight segment.

Minimum balance

See minimum payment due.

Minimum payment due

The minimum payment amount which must be received by the due date in order to avoid a late fee from the creditor.

Modified Adjusted Gross Income (MAGI)

The amount of income that determines how much of an individual's IRA contribution is deductible. It is found by taking the individual's adjusted gross income and adding back certain items such as foreign income, foreign-housing deductions, student-loan deductions, IRA-contribution deductions and deductions for higher-education costs.

Mortgage

A lien on real estate to secure repayment of a loan.

A legal document between a lender and a borrower drafted for the purpose of repaying a loan.

Mortgage broker(s)

An intermediary between a borrower and a lender.

Mortgage lender

A lender who specializes in mortgages.

Mortgage payment

The monthly payment amount owed to a lender which covers the principal and interest on a property.

Multiple Listing Service (MLS)

A nationwide database of properties available for sale used by real estate agents.

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N

National Automobile Dealers Association of America (NADA)

Founded in 1917, it represents new car and truck dealers, both domestic and international.

National Board of Realtors

A membership group for realtors also known as the National Association of Realtors, or NAR.

Negative Equity

When the current market value of a property is less than the amount owed.

Non-conforming

A loan which does not conform to any strict lending guidelines.

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O

Opportunity cost

The money that would accumulate due to interest if you were to leave it in your savings account.

Online Bill-pay

An electronic method for paying bills online using the Internet.

Origination fee

A fee charged by a lender to the borrower for initiating a real estate loan. See points.

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P

Payroll deduction IRA

An option for employers to offer their employees who want to save toward their retirement. There usually is no matching on the part of the employer.

Pension plan

A type of retirement plan, usually tax exempt, wherein an employer makes contributions toward a pool of funds set aside for an employee's future benefit. The pool of funds is then invested on the employee's behalf, allowing the employee to receive benefits upon retirement.

Penalties

A fee assessed by the creditor for breaching the terms and conditions of your agreement.

Pest inspection

An inspection required by a lending or government institution prior to lending money to a borrower to insure that a property is free from structural pest damage and decay.

Point(s)

An upfront fee that a lender may charge a borrower for originating a loan. One point is equal to one percent of the loan amount.

Portfolio

A collection of investments all owned by the same individual or organization.

Pre-approval

A confirmation stating the amount a lender is willing to give to a borrower after an application has been filled out.

Pre-payment penalty

A penalty for paying a loan early before its due date.

Pre-qualify

When you are told by a financial institution how much of a loan you will probably be able to receive based on their cursory look at your financial information.

A lender's opinion of how much a borrower may qualify for without filling out an application.

Pre-set spending limit

The maximum dollar amount to which a borrower has access through a line of credit.

Previous balance

The ending balance from a borrower's previous statement and starting balance for the current statement.

Prime Rate

The rate of interest publicly announced periodically by a lender. It is based on various factors, including banks' costs and desired return, and is it used as a reference point for pricing some loans.

Principal

The amount of money owed on an outstanding balance excluding interest.

Principal and interest (P & I)

The amount of a home equity loan payment including the principal and the interest

The actual mortgage amount and interest paid back to the lender.

Principal, Interest, Taxes and Insurance (PITI)

A term used by lenders or brokers to provide a total monthly payment which includes Principal, Interest, Taxes, and Insurance.

Private Mortgage Insurance (PMI)

Insurance that is provided by a private mortgage insurance company to protect lenders against loss if a borrower defaults on a mortgage loan.

Processing fee

A fee charged by the lender for the work required to process a loan.

Property maintenance

The act of keeping a property presentable and livable.

Property tax(es)

The tax paid on a property based on its assessed value.

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R

Real estate agent

A person licensed to sell or purchase a property on behalf of the seller or borrower.

Realtor

A member of the National Association of Realtors.

Recording fee

A fee that is charged as part of the closing cost to record a home sale as a matter of public record.

Recurring debt

A debt obligation which appears month-to-month until the balance is paid in full.

Refinance

To replace a loan with a more favorable one.

Replacing an older loan with a newer one.

Regular cycle ADB

A method of calculating interest which is obtained by taking the daily balance on each day of that month's billing cycle, less any payments received, divided by the number of days in that billing cycle.

Relationship Banking

A product offered by banks in which you get special discounts and incentives if you have several accounts with the same bank. Generally, the checking account product serves as the anchor account.

Remaining balance

The amount of principal left unpaid on a mortgage loan.

Reward points

An incentive in the form of points awarded to the borrower for using credit which can be exchanged for merchandise or rebates.

Rewards programs

Credit card programs issued by creditors which offer reward points or cash-back incentives to borrowers for making purchases using their card.

Revolving debt

Debt in which your monthly payment fluctuates based on how much you spend or pay off each month.

Roth IRA

A tax-deferred retirement account where the contributions are not tax deductible. There is also no tax on the withdrawals as long as the taxpayer is over 59 1/2 and the account has been open for five years.

Rural Housing Service (RHS)

An agency of the U.S. Department of Agriculture that provides financing to farmers and qualified borrowers who buy property in rural areas and are unable to obtain loans elsewhere.

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S

Sales agent

The agent who handles and shows the property to the buyer.

Sales agreement

The contract signed by the lender and buyer specifying the terms of the sale.

Savings account

A deposit account at a financial institution which generally pays interest, but cannot be withdrawn by check writing.

Savings Incentive Match Plan for Employees (SIMPLE IRA)

An employer-sponsored plan where plan contributions are made to a participating employee's IRA.

Secondary market

The market where mortgages are bought and sold by investors.

Secured

A debt which is secured with some type of collateral (e.g., a savings account, automobile, home).

Seller

The person who is listing a property for sale.

Service fee

A fee charged by a creditor for performing a specific account service.

Settlement cost(s)

All expenses related to transferring home ownership from the seller to the buyer. Also referred to as closing costs.

Simplified Employee Pension (SEP) Plan

A retirement plan for self-employed or small business owners.

Social Security

A US federal benefits program that includes retirement benefits, disability income, veteran's pension plus other benefits. Employees and employers contribute to this fund through taxes equally levied.

Soft inquiry

A request to see a borrower's report which gets noted in the inquiries section of the report but doesn't effect one's credit score.

Spousal IRA

A traditional or Roth IRA funded by a married taxpayer in the name of his or her spouse who has less than the maximum allowable annual IRA contribution in annual compensation.

Statement credit

A rewards credit issued by a creditor in the form of a billing credit which is deducted from the balance due amount.

State Board of Realtors

A membership group by state which belongs to the National Board of Realtors.

Sub-prime

A type of mortgage loan that is offered to individuals with poor credit.

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T

Tax savings

The amount a borrower can save by writing off the interest on a mortgage loan.

Tax-write-off

See tax savings.

Teaser rate

A special introductory rate on an adjustable rate mortgage which is below current market rates to entice borrowers.

Telephone transfer

A monetary exchange made from one account to another by phone.

Term

The period of time that you have to pay off a loan.

Title

The deed to a property.

Title company

A company that assures that the title to the property is clear and free from liens.

Title examination

The review of a property's title by the title company against public records.

Title insurance

Insurance which protects a lender or buyer against property disputes.

Traditional IRA

An Individual Retirement Account where the income generated is tax-deferred until withdrawn. Your original contribution may or may not be tax deductible, depending upon your specific circumstances.

Transaction fee

An amount charged in addition to the interest rate for each type of transaction a borrower makes.

(Home Equity) - A fee charged each time you draw on your credit line.

Transfer fee

See service fee.

Treasury bill (T-bill)

Securities auctioned by the U.S. Government to help pay off its debt obligations.

Two-cycle Average Daily Balance (ADB)

A method of calculating interest which is obtained by taking the daily balance on each day of the previous two month's billing cycle, less any payments received, divided by the number of days in that billing cycle.

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U

U.S. Federal Trade Commission (FTC)

See Federal Trade Commission.

Underwriting

The process a lender uses to determine risk and whether or not to extend a loan to a borrower.

Unsecured

A debt which requires no collateral.

Utilization ratio

(Auto Loan) - The ratio of used credit and available credit.

(Credit) - The percentage of a borrower's available credit in use versus the total credit.

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V

Variable APR

An adjustable rate that fluctuates with the movement of some index or the prime rate.

Variable rate

An interest rate that may change periodically, related to an index for the life of the loan.

An interest rate that may fluctuate during the term of the deposit account. Sometimes the rate changes based on changes in an index rate, such as the prime rate or other prescribed criteria. Sometimes the bank changes the rate at its discretion or internal indices.

Veterans Administration (VA)

The Veterans Administration (VA) is a government agency responsible for administering benefits to veterans, their families, and survivors.

Virtual tour

A tour of a home which can be viewed on the Internet.

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W

Withdrawal

The act of taking money from a Home Equity Line of Credit.

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Z

Zero-down

When a lender requires no money for a down payment from a borrower.

Zero introductory rate

A special promotional rate that creditors charge borrowers on purchases or balance transfers for opening a new account.

Zoning restrictions

The rules and regulations used by municipalities which control the use of lands and buildings.

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