Credit Card Terms and Definitions for New Home Buyers

Annual Percentage Rate

The yearly percentage rate imposed when a balance is held on a credit card. When an outstanding balance is held, this rate is applied to your outstanding balance each month.

Available Credit

The available credit on a credit card is the amount of money that can be charged on a specific credit card without going over the limit. It is the difference between the credit limit and the outstanding charges on the account. For example, if you have a balance of $100 on a credit card and your limit is $150; your available credit is $50.

Balance-to-Limit Ratio

Balance-to-limit ratio is used in the calculation of credit scores. It compares the amount of credit being used to the total credt available to the borrower. Having a low ratio -- in other words, not much debt but a lot of available credit -- is good for your credit score. Also known as a credit utilization ratio.

Consumer Cedit File

A consumer credit file is the collection of an individual consumer's debt repayment records, stored at a credit reporting agency (credit bureau). Credit scores are based on consumer credit files, and determine whether an individual will get a credit card or other loan, and at what rate.

Credit History

A record of a person's debt payments.

Credit Score

A credit score is a three digits number that summarizes how well a person or business has handled debt. Higher numbers indicate a better credit rating and allow for larger loans and better interest rates. Low numbers will indicate a worse credit rating and therefore borrowers will have terms with higher interest rates, less amounts available to borrow and may be turned down for loans or lines of credit. Though there are a variety of indicators of credit, the best known and most widely used system is the Fair Isaac Corp. (FICO) product.

Credit Utilization Ratio

A credit utilization ratio is used in the calculation of credit scores. It compares the amount of credit being used to the total credit available to the borrower. Having a low ratio -- in other words, not much debt but a lot of available credit -- is good for your credit score. Also known as a balance-to-limit ratio.

FICO Score

The software used to calculate a great number of credit scores was created by Fair Isaac Corporation--FICO.

VantageScore

A credit score product launched in March 2006 by the three major credit bureaus (Equifax, Experian and TransUnion) as a competitor product to Fair Isaac's FICO Score. Like FICO, VantageScore is a three digit numeric value that assesses a borrower's credit risk. VantageScores range from 501 to 990, with a higher score representing a lower risk to the creditor.