Credit Terms, Defined
A short reference for the words that appear on statements and applications.
Lenders and credit bureaus use a small vocabulary that rarely gets explained. Here is what the terms mean in plain English.
APR. Annual percentage rate. On a credit card, effectively the annual interest rate. On a loan, it also folds in certain fees, which is why it can differ from the stated interest rate.
Authorized user. Someone added to another person's credit card account. They can use the card but are not legally responsible for the debt.
Charge-off. When a creditor writes a debt off as unlikely to be collected, usually around 180 days past due. You still owe it, and it is often sold to a collector.
Credit limit. The maximum balance a revolving account allows.
Credit utilization. Your reported balance as a percentage of your credit limit. Measured at the statement date, not the due date.
Delinquency. A payment 30 or more days past due, at which point it is generally reported to the credit bureaus.
Grace period. The window between your statement date and due date during which paying in full avoids interest on new purchases. Cash advances usually have none.
Hard inquiry. A credit check run by a lender making a lending decision. Affects your score slightly and is visible to other lenders for two years.
Installment credit. A loan repaid in fixed payments over a set term, such as an auto loan or mortgage.
Minimum payment. The smallest amount that keeps an account current. Paying only this maximises the interest you pay over time.
Revolving credit. An account with a limit you can borrow against repeatedly, such as a credit card.
Secured debt. Debt backed by collateral the lender can take if you do not pay. A mortgage and an auto loan are secured. Most credit cards are not.
Soft inquiry. A credit check that does not affect your score, including checking your own report and pre-screened offers.
Statute of limitations. The period during which a creditor can sue over an unpaid debt. It varies by state and by debt type, and making a payment can restart it.
The Consumer Financial Protection Bureau maintains fuller definitions and explains your rights under federal credit reporting law.
This article is general information about how consumer finance products work in the United States. It is not financial, tax or legal advice and is not a recommendation of any specific product or provider. Rules and pricing vary by state and by institution.