Smart Finances: Common Credit Terms to Know

Estimated reading time: 3 minutes

When it comes to building your credit, it can feel like a lot to keep track of, especially if you’re unfamiliar with the language. To ensure you’re as confident as can be as you build your score, let’s go over some popular terms you should be aware of.

What is a Credit Score?

Your credit score is the numerical value of your credit. Your score is used to predict how likely you are to pay back a loan on time. Credit bureaus use a formula called a scoring model to create your score from the information gathered in your report. Since different bureaus and companies have different scoring models, each may have its own unique score.

What is a Credit Inquiry?

A request to examine your credit file is called an inquiry. Generally, a credit inquiry falls into one of two types: hard pulls and soft pulls. Soft inquiries are common and do not change your credit score. Examples of this can be when you request your annual credit report or when you receive a credit card promotion in the mail. When a lender or company requests to review your credit report as part of the loan application process for a pre-approval, it’s known as a hard inquiry.

What is a Trigger Lead?

A “trigger lead” occurs when you apply for a loan or new credit. And the lender checks your credit report with a hard inquiry. This tells the major credit bureaus that you’re looking for new financing. Companies and lenders can then buy your information from the trigger lead to offer you their services, hoping you’ll choose them instead of the original lender.

What is a Credit Report?

A credit report is a statement that includes information regarding your credit activity, late payments, usage, and current loan or credit situations. The state of your credit accounts and your recent loan paying history are available on your credit report.

What is a Fraud Alert?

By issuing a fraud alert on your credit, you are requiring creditors who check your report to take steps to verify your identity before opening a new account, issuing an additional card, or increasing the credit limit on an existing account. When you place a fraud alert on your credit report for one of the national credit reporting companies, they must notify the others.

What is Identity Theft?

Identity theft occurs when someone steals aspects of your identity to commit fraud. This often occurs by using your personal information without your permission, such as your name, Social Security number, and credit card information.

What is Identity Monitoring?

Identity theft services will monitor your personally identifiable information on websites, public records, social media networks, and other places online for any unusual activity that could be signs of identity theft.

What is a Security Freeze?

Also known as a credit freeze, a security freeze prevents prospective creditors from accessing your credit file. This can stop identity thieves from being able to open new accounts in your name. While a freeze is in place, only a limited number of entities can access your information.

Have More Questions?

We can provide answers to your mortgage questions and needs! Although we aren’t credit experts, we can point you in the right direction for resources. When you’re ready to learn more about how we can help you achieve homeownership, contact us today!