UNDERSTANDING CREDIT

MAINTAINING

CREDIT

SAFETY & SECURITY.

Technology has definitely made banking more convenient in recent years. But it has also introduced some risks as criminals continually find new ways to use that same technology for more, shall we say, unscrupulous behaviour. You've worked hard to get and maintain a good credit score so it's important that you do whatever you can to protect it at all times. Simple things like signing your card as soon as you get it, keeping an eye on your statements, guarding your personal information and even checking your credit report once a year can go a long way to keeping your credit safe.

Using a credit card. Identity Theft.

CREDIT DICTIONARY

Credit can be a complicated topic, we know. There are a lot of terms and "jargon" that you may not be familiar with. Fortunately, we've created this handy-dandy dictionary to help you sift through it all. You can either scroll through the whole list or search by a particular letter.

Find words starting with:

Account Number:

This number (on the front of your credit card) is given to you by a bank or credit card company to represent your account.

Annual Fee:

A fee you pay once a year for the use of a credit card. This fee is not based on your balance and has no impact on your interest or credit limit. It's usually a single, flat fee charged once a year.

Annual Interest Rate (AIR):

A percentage number that represents the interest you're paying in a year.

Annual Percentage Rate (APR):

The yearly percentage rate charged when a balance is held on a credit card. This rate applies to each month there's an outstanding balance.

Asset:

Anything that you own that has value and can be considered in your overall financial health.

Authorized Account User:

A person that the lender has authorized to make charges to a credit account.

Bad Credit:

This usually means a poor credit rating. Many things can damage your credit rating, like missed payments, late payments, declaring bankruptcy or going over your credit limit.

Bankruptcy:

Legally, bankruptcy means the proceeding that happens when people or businesses take on debts that are larger than their income or assets. When you declare bankruptcy, your assets can be taken and given to the people you owe. The court may also restrict your ability to borrow in the future.

Cardholder:

The person that the credit card was issued to, or another person who is authorized to use the card.

Card Verification Value:

A three- or four-digit security code, usually found on the back of your credit card, above the signature. This code is unique to each card and is sometimes used to identify you for secure Internet, mail or phone purchases.

Cash Advance:

Using your credit card to withdraw cash from your credit account at a bank or ATM. This cash may incur a higher interest rate than normal credit card charges and you may have to pay a transaction fee. Also, your cash advance limit may be lower than your regular credit limit. It's best to leave cash advances for urgent situations when you can't get cash from your bank account.

Collateral:

Money or assets (such as property) that you put down as security to prove to a lender that you’re able to pay back what you owe. Many kinds of credit can require collateral. In the case of secured credit cards, you’ll most likely have to put down security funds to guarantee repayment.

Convenience Cheque:

A special cheque that's drawn from your credit account but used in the same way as a personal cheque from your bank account.

Credit:

Credit means buying something now and paying for it at a later date with or without interest.

Credit Bureau:

An organization that collects details of credit behaviour from various sources to create a "big picture" view of your credit. The credit bureaus are the "keepers" of your credit history. We have three credit bureaus in Canada: Equifax, Experian and TransUnion.

Credit Card Issuer:

Any company that issues credit cards. This could be a bank, credit union, or other financial company. Also see "Lender."

Credit Card Number:

The number stamped or embossed on your credit card.

Credit History:

The history of your credit use. It lists whether or not you've made your payments on time, stayed within your limit and practiced good credit habits.

Credit Limit:

The highest amount of money you can charge to your credit card account. Going over your credit limit often can affect your credit score and you may be charged a fee.

Credit Report:

A report showing a "snapshot" of your credit history in Canada that you can request from the credit bureaus. Detailed reports can be purchased for a reasonable fee, but simpler versions can often be ordered by mail for free.

Credit Score:

This is a number that reflects your general "credit worthiness," in other words, how much of a risk you are to lenders. Created by credit bureaus, it's one of the factors lenders use when deciding to give you credit. See Credit Bureau.

Default:

Generally, the failure to make your payments. When you don't make your payments, you're said to have "defaulted" on your loan.

Fraudulent Transaction:

An unauthorized use of your bank or credit card without your knowledge or consent. This is a crime and should be reported both to the policeand your financial institution.

Fraudulent User:

Someone other than you who uses your card or account number to purchase goods or services without your consent.

Grace Period:

A length of time in which a lender will allow you to pay your credit balance without paying interest and/or late fees. This is a feature of some secured credit cards.

Lender:

When you see the word "lender" on this site or in your credit research, it means any financial institution or company that gives you access to credit, such as credit cards, lines of credit, or mortgages. A lender could be a bank, credit union, or credit card company.

Minimum Payment :

The absolute minimum amount you need to pay on your credit card balance every month to keep your account in good standing.

Overlimit:

Any credit used on a credit account that has gone over the credit limit. Some credit card companies will allow, rather than decline, the transaction. You may be charged extra fees for this.

Overlimit Fee:

A fee you may be charged for allowing your balance to go above your credit limit.

Posting:

This is what the banks call it when your credit account balance is updated to show recent activities, such as purchases you've made, cash advances, payments, and more.

Prime Rate (Prime Interest Rate):

A variable interestrate generally tied to the interest rates set by the Bank of Canada. Some credit cards have a variable interest rate that follows the Canadian Prime Rate. So, if the Prime Rate goes up or down, so will your interest rate.

Refund:

Money credited (given back) to a credit account.

Secured Credit Cards :

Unlike unsecured credit cards, these are cards that require you to offer collateral such as property, cars or a cash deposit. Secured credit cards are recommended for newcomers with no credit history who are trying to build their credit.

Secondary Cardholder:

Another person who shares your credit account. Many lenders allow you to add an extra card to your account for a family member to use. If you're the main cardholder, you're still responsible for all the payments.

Security Deposit:

A sum of money, paid up front, as security in case a borrower defaults on their credit. Also known as Security Funds.

Statement:

A written document from your financial institution that lists all the transactions you've made on your account. This is usually sent once a month. A bank or credit statement is a record of deposits, withdrawals, credits, debits, cheques, transfers, and fees – as well as the interest you've paid or earned.

Unsecured Credit Cards:

Unlike secured credit cards, these are cards that don't require collateral. To qualify for unsecured credit, you'll need to have a good credit history in Canada, as well as assets and income that show you can repay your debts.