Accident Sickness and Unemployment Insurance (ASU)

Fairly useless and over-priced insurance which provides cover for missing payments in the circumstances described, usually after a wait period of around three months. If added to a loan, can increase repayments significantly. See also Payment Protection Insurance.

Additional Cardholder

An extra credit card to enable someone else to make purchases on your credit card account, but you remain fully and solely liable for all spending on both cards.

Adjudication

In credit terms this usually refers to the action of a judge making a decision to bankrupt someone, based on the facts presented to him or her, and coming to the conclusion that the person cannot continue to pay their debts as they fall due.

Administration Order

An informal arrangement where a court agrees that a person’s debts of up to £5,000 can be paid in part, and by installments, based on certain conditions. Stays on your credit file for 6 years, alongside all the loans and credit which were included in the Administration Order.

Adverse credit

Credit slang for people with a less-than-perfect record of repaying their credit commitments. Can also refer to late payments, defaults, judgments, repossessions and other ‘adverse’ items on a credit file. See also Sub-prime credit.

AER

See Annual Equivalent Rate.

Agreement in principle

Credit slang for ‘you appear to meet the criteria, but we’ll have to check things out’. Not legally binding, so don’t rely on this until you have a full Credit Offer.

Amortisation

Paying off a debt, over a period of time, by a series of regular repayments.

Annual Equivalent Rate (AER)

The compound amount of interest you’re likely to earn on an investment, or on a savings account, at current interest rates. This is a marketing trick – it makes the rate look more attractive – and applies the same principles used in calculating APR on loans, to savings products. Be careful only to compare AERs with AERs and nothing else.

Annual Fee

An administration charge levied by a lender – typically by a credit card company. Annual fees occur typically when a card is not used much.

Annual Percentage Rate (APR)

This is a rate of interest that lenders are compelled by law to use when advertising credit – it represents the actual cost of credit including all interest charges and fees, all expressed as one figure. By requiring lenders to set out the APR in a consistent way, an APR allows you to compare credit offers on a like for like basis.

Annuity mortgage

See Capital and Interest Mortgage.

Application score

A credit score calculated only on the answers you provide in an application form for credit. Surprisingly accurate bearing in mind that no credit report information is taken into account.

Application search

See Search footprint.

Arrangement fee

An administration charge made by lenders for arranging credit. By law, an arrangement fee must be quoted in your written offer of credit and in your credit agreement. Not all lenders charge an arrangement fee.

Arrangement to pay

A situation where a lender agrees that you can pay less than the repayments legally due, because of a loss of income or ill health. Arrangements to pay are recorded on credit files and are generally regarded as bad by other lenders.

Arrears

If you miss payments on a credit facility, your account is ‘in arrears’ by the sum you haven’t paid. This can be expressed by amount of the missing payments, or by the number of months’ payment you have missed, such as ‘£50 in arrears’ or ‘3 months in arrears’.

Attachment of Earnings Order

A court order served on your employer to deduct an amount of money from your pay and to send it direct to a lender who has obtained judgment against you. This is one of several remedies after judgment that a lender can use, once it has obtained judgment against you.

Audit footprint

These relate to accesses of your credit file for reasons other than credit application, or general enquiry. They are not seen by anyone other than you and the credit reference agency itself. Typically these relate to your own activity using online credit reports such as via checkmyfile.com, or if you order your statutory credit file or view it online direct from the agency itself. Very few others may access your credit file. Section 29 of the Data Protection Act 1998 enables persons such as HM Customs and Revenue, the police and others to look at your credit file, but only under strictly controlled circumstances, and as a safeguard to your privacy, audit footprints are placed on your credit file. They are not seen by lenders, or used in credit scoring.

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Bank reference

A carefully coded response given by your bank when someone else asks how good a customer you are. A typically good response is ‘Respectable and trustworthy, considered good for your figure and purpose’. Omission of words such as ‘trustworthy’ are important, and small variations have hidden meaning:
- ‘considered good’ – OK
- ‘should prove good’ – overstretched but might be OK
- ‘we do not feel he would enter into a commitment he could not see his way clear to fulfil’ - dodgy.

Bankruptcy order

A court order which is made following a petition for bankruptcy where it is decided that a person can no longer pay their debts as they fall due. Once the order is made, the person is ‘bankrupt’. Bankruptcy records remain on your credit file for six years and on land registry files for twelve years, whether you are discharged or not.

Base rate

This usually refers to the Interest rate set by the Bank of England. It is more-or-less the interest rate charged by the Bank of England when it lends money to banks. When you are charged interest by a bank, a bank will also have its own base rate, which it sets independently of the Bank of England base rate. If you have an overdraft, you’ll often be charged a margin over base rate, such as ‘7% over base rate’, so if base rate is 6%, you’ll be charged (7+6) =13%. You can find the latest Bank of England base rate by clicking here.

Bridging Loan

When you buy and sell properties, always sell your existing house first before committing to buy a new house. If you can’t do this, a bank may lend you money to help you to buy the new house, before you have sold the old one. Effectively the loan ‘bridges’ the gap. Bridging loans can be either ‘closed’ – where the sale of your old house has been legally contracted by exchange of contracts – or ‘open ended’ where it has not. For obvious reasons, bridging loans should be avoided as they can be financially crippling, especially if open ended. Always take professional advice before considering a bridging loan.

Broker

A middleman who finds a credit facility or mortgage for you and takes a commission, usually from the lender, for bringing business to its doors. Sometimes called an intermediary.

Building Society

A financial institution owned by its members rather than by shareholders, set up originally on the concept that it can enable its members to buy their own homes using other members’ deposits.

Bureau score

A basic credit score provided by a credit reference agency and used mostly by start-up lenders, until they are in a position to develop a more sophisticated credit scorecard, or by those who are not members of data sharing clubs such as CAIS, Insight or Share. Some established lenders use bureau scores to add weight to their own internal risk assessment systems.

Buy-to-let

A term used to describe a property that has been purchased by a landlord with the intention to let it out to paying tenants. A ‘buy-to-let’ mortgage is the loan given to a landlord with the express permission of the lender that the property can be let out. A buy-to-let mortgage often costs around 1% more than a standard mortgage.

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CAIS

Stands for Credit Account Information Sharing – Experian’s combined database of the payment history of individuals provided monthly by over 200 lenders to its data sharing club. This information is shared with your consent, which you normally give when you apply for credit. It is used primarily for the assessment of credit applications, in particular to help prevent over-indebtedness, for the prevention and detection of fraud and for the tracing of gone aways.

Callcredit

UK owned company, part of the Skipton Group. One of the big three credit reference agencies operating in the UK that collects information about you from several sources and whose principal business is putting the information together into credit files and then selling them to companies, banks, building societies, credit card companies, employers, landlords and others.

Callscore

A bureau score distributed by UK credit reference agency Callcredit.

Cap

In interest terms, the maximum rate that will be charged. In flexible loan terms, the maximum amount that can be borrowed at any time (including interest).

Cap and collar

Used to describe an interest term that cannot exceed the cap, and will not fall lower than the collar.

Capital

The original sum of money involved in a financial transaction. When you save money, this is the amount of your initial investment, or your ongoing investment including interest eaned. When you borrow, this is the amount of the loan you originally seek from the lender. If interest is added to a credit facility, it is referred to as being ‘capitalised’.

Capital and Interest Mortgage

A type of mortgage where monthly repayments include capital repayments and interest, so that at the end of the mortgage term, your mortgage will be repaid in full.

Capitalised interest

See Capital

Capped-rate

An interest rate that cannot exceed a specified limit, irrespective of any fluctuations in the base rate, for a specified period.

Card issuer

The bank, building society or store whose name is on your credit card.

Card Protection

Assistance provided for when you - or your family - lose your credit cards at home or abroad. A single call to the card protection company triggers off a series of calls to each of your card companies to advise them that your cards are lost or stolen. Can be expensive if purchased through your credit card company.

Cash Advance

Using your credit card to get cash either across the counter at bank branches or through cash machines. Be wary that cash advances are often subject to a handling fee of around 2%.

Category 0

Protective Registration (Category 0), alongside Victim of Impersonation (Category 2) are the only two fraud warning categories that are visible to consumers on credit files from a list of other fraud warning categories that lenders, that are members of CIFAS, see when they search you. A Protective Registration (Category 0) warning is placed on a credit file by a consumer asking lenders to be especially vigilant as the consumer is concerned that he or she is at risk of identity fraud.

Category 2

One of only two types of fraud warnings on the CIFAS database that are visible to consumers on credit files, a Category 2 warning denotes that the person is a Victim of Impersonation. One of several CIFAS fraud categories that are shared between members of CIFAS.

CCA

Stands for Consumer Credit Act 1974.

CCJ

Stands for County Court Judgment

CCN

Now called Experian. Stands for ‘Credit Control Nottingham’.

CCTA

Stands for Consumer Credit Trade Association

Charge card

A type of credit card where full repayment is automatically required every month, and which do not carry a credit limit. Diners Card and American Express are issuers of charge cards.

Charge over Equitable Interest

A mortgage given by one party over a property that is jointly owned. Creditors can sometimes insist that IVAs are secured using a Charge over the Equitable Interest of the debtor, which means that if the IVA fails for any reason, then creditors can look to your home for repayment of your debts.

Charging Order

This is another remedy after judgment which a lender can seek from the Courts once it has judgment. It effectively places a sort of mortgage on your property at the direction of the court. In fact, it is a charge over the net sale proceeds, so usually has little impact until you sell your property, when the amount, plus interest, must then be paid to the lender. It is not possible to remortgage or to obtain a secured loan when a charging order is in place.

CIFAS  www.cifas.org.uk

A trade organisation – known now as ‘The UK’s Fraud Prevention Service’. CIFAS once stood for ‘Credit Industry Fraud Avoidance Scheme’. Its 270 members, (mostly credit card companies, banks and telecoms companies), share information about frauds to help reduce risks and to protect individuals.

CIFAS entry

A CIFAS entry on your file will mean that any application for credit or other services from the address may be subject to further checks to validate the details given and to confirm the identity of the applicant. Once these details are confirmed, the application will be assessed in the usual way. No one should be refused credit simply on the basis of a CIFAS warning. It should be noted that CIFAS is an address-based system, so other people who are not financially connected to you may appear on your credit file. This will mean that your credit applications cannot be automatically processed, and you may be subjected to delays because of the entry. The length of time the warning remains on your credit file is variable depending on several factors connected with the actual or attempted fraud. CIFAS entries also include Protective Registration – added to credit files by consumers to guard against identity fraud. Lenders who are members of CIFAS may see all fraud warnings registered against you, or against your current or previous addresses, but from 5 January 2009, your consumer rights entitle you only to see two types of CIFAS fraud warnings, Category 0 (Protective Registration) and Category 2 (Victim of Impersonation).

CML  www.cml.org.uk

Council of Mortgage Lenders - a trade organisation of home finance providers consisting of specialist mortgage lenders, banks and building societies. Runs the Repossessions Register which appear on credit reports.

Collar

Used to describe an interest rate that cannot fall below a specified level over a set period of time.

Collateral

Americanised term for security.

Commission

A fee paid by a financial institution to a broker or intermediary in return for referring new business.

Consolidation Loan

Taking out one big loan to repay a lot of smaller ones. Because the new loan is often repayable over a longer period, the repayments on the consolidated loan are often a lot less than the sum of all those relating to the smaller loans. Beware of early repayment penalties when considering a consolidation loan.

Consumer Credit Act 1974

The law that gives consumers protection and sets out how credit should be marketed and managed.

Consumer Credit Trade Association.

A trade organisation that looks after the interests of generally smaller consumer lenders.

Cooling Off Period

A period allowed by law to enable a consumer to cancel an agreement without incurring any penalty. In credit, the cooling off period is 5 days, though some lenders give more.

County Court Judgment (CCJ)

The legal acknowledgment that a debt is due. To obtain a CCJ, a lender has first to issue a Notice of Default, you have to ignore it, the lender must then issue a summons for you to attend court, and either you fail to turn up at court, or lose the case. A CCJ remains on your credit report for 6 years irrespective of whether you subsequently pay off the debt.

Court information

Court information held about you or people who may be assumed to be you is given on public credit reports and on private credit reports. The most common form of Court Information are County Court Judgments or CCJs. Where present, these remain on your file for 6 years from the date of the judgment, whether satisfied or not.

Credit

The act of someone lending you money now on the basis that you will repay from future income.

Credit Agreement

A document that sets out the exact terms of credit, in accordance with strict requirements under the Consumer Credit Act 1974.

Credit card cheques

A cheque book issued on a credit card account by a fairly small number of card issuers. Often carry administration fees of around £25 per cheque. Interest can be charged at cash withdrawal rate, so be careful to check the costs before you use them.

Credit file

Another term for credit report.

Credit impaired

Credit slang for someone with defaults, judgments or insolvency recorded on their credit report.

Credit limit

The maximum amount of credit that a lender will extend to you. Varies from lender to lender. See overdraft limit.

Credit search

A check the lender makes with a specialist company to find out whether you have any County Court Judgments or a record of not paying loans, credit-card bills etc.

Credit rating

This is a broad classing of credit scores, which in turn determines risk. For consumers, credit ratings fall into 5 bands, one star to five stars, where one star relates to sub-prime credit customers and five stars relate to super-accepts and generally undoubted customers. Average risk consumers score three stars. For companies, credit ratings are given by specialist firms such as Standard and Poors or Moody, and are expressed in letters. AAA+ is the best corporate rating.

Credit reference

A general term for a credit report, status report or bank reference.

Credit report

Comes in two main types – public credit report or private credit report. Your public credit report usually consists of electoral roll information, insolvency records, judgments and any notices of correction. Your private credit report consists of your public credit report plus credit history information obtained from lenders who are members of data sharing clubs. Only 200 or so lenders see your private credit report. Most employers, landlords and others see your much less detailed public report.

Credit score

The statistical probability of you defaulting on a credit facility, expressed in a simple number to help credit underwriters to handle them. In general terms credit scores run between 0 -1000, with 1000 being the best score (the least likely to default). Every credit scorecard is different, as each is developed specifically for a particular type of lender. What works well for a credit card company might not work as well for a mobile phone supplier for instance. See also Fair Isaac.

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Data sharing

The sharing of a six year payment history data by around 200-250 UK lenders – so that all lenders can make a more informed decision and avoid over-indebtedness. There are three main data sharing clubs – CAIS (hosted by and distributed by Experian), Insight (hosted by and distributed by Equifax) and Share (hosted by and distributed by Callcredit). The sharing of data is regulated by a voluntary code known as the Principles of Reciprocity and overseen by a steering group known as SCOR.

Deed release fee

One of a number of administration fees charged by mortgage lenders once a mortgage has been repaid to cover the costs of returning the title deeds to you.

Default

The event where you fail to respond to a Notice of Default. At this point, you cease being a customer, and become a debtor.

Delinquent

Credit slang for a customer not paying on time.

Delinquent account

Generally a customer with sustained arrears of 2 months or more. Similar to a default, but a Notice of Default may not have been served on all delinquent accounts.

Delphi

A bureau score distributed by UK credit reference agency Experian.

Deposit Account

An account with a bank or building society, which pays a variable rate of interest. You may get a higher rate of interest if you choose an account which doesn't give you instant access to your money.

Depreciation

The decrease in value of property (for example, your house) or some other asset (for example, your car) over a period of time due to natural wear and tear through regular use, or obsolescence.

Disassociation

Credit slang – the word should correctly be spelt ‘dissociation’ – referring to the removal of third party data from a person’s credit file at the request of that person.

Discounted-rate mortgage

A reduction on a mortgage lender's standard variable rate of interest that applies only for a set period of time. Usually an introductory offer.

Drawdown loan

Sometimes known as a drawdown facility, a loan which enables you to take out further advances with very little formality.

Dynamic delinquency

A method used by scorecard statisticians to chart the expected level of arrears on a chunk of new customers against actual delinquency, to check that the scorecard is still working properly and that new customers taken on are in line with the target market of customers.

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Early repayment penalty

A fee you are sometimes required to make to a lender if you pay off a loan or mortgage before the scheduled term of the credit facility.

Electoral Roll

The record held by your local authority which records whether you are eligible to vote in various types of election. Important in credit as the electoral roll (sometimes known as the voters’ roll, or the electoral register), is used as an index for credit files, in the absence of any other national database of UK residents.

Endowment mortgage

An interest only mortgage where the capital is expected to be repaid by the proceeds of an insurance policy on maturity.

Endowment policy

A type of life insurance cover that pays out in full if you die during the term of the policy, or upon a set future date. Used in conjunction with endowment mortgages.

Enquiry

See Search footprint.

Equity

In mortgage lending, the difference between the value of your property and your current mortgage.
In investment-speak, often refers to stocks and shares.

Equity Release

Taking a further advance on an existing mortgage to access some of the difference between the value of your property and your current mortgage.

Equifax

US owned corporation. One of the big three credit reference agencies operating in the UK that collects information about you from several sources and whose principal business is putting the information together into credit files and then selling them to companies, banks, building societies, credit card companies, employers, landlords and others.

Experian

UK owned public company. One of the big three credit reference agencies operating in the UK that collects information about you from several sources and whose principal business is putting the information together into credit files and then selling them to companies, banks, building societies, credit card companies, employers, landlords and others.

Extended Credit Taker

Credit slang for a credit card customer who pays interest on outstanding balances, (and is therefore very profitable). See also Full payer.

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Fair Isaac

US corporation specialising in developing and selling credit scorecards to banks, credit card companies, utilities and others worldwide. Fair Isaac, Inc is the largest scorecard company in the World. In the US, its FICO score is used by all three US credit reference agencies (Experian, Equifax and TransUnion).

FICO score

In the US, all three credit reference agencies distribute a standardised credit scoring system known as FICO scores, developed by Fair Isaac. The higher your FICO, the better. FICO scores also exist in the UK, but are not distributed by the UK credit reference agencies, who instead distribute their own bureau scores (known as Callscore, Delphi and Wescore).

Financial Ombudsman Service

An independent referee who sorts out problems that remain unsolved through normal complaint procedures. The decision of the Ombudsman is usually binding on the provider of financial services but do not affect the statutory rights of consumers.

Financial Services Authority (FSA)  www.fsa.gov.uk

An independent non-governmental body, given statutory powers by the Financial Services and Markets Act 2000 to regulate the financial services industry in the UK. The FSA has been given a wide range of rule-making, investigatory and enforcement powers.

First mortgage

Sometimes called first charge. The earliest (in history) mortgage recorded against a property, given by its current owners. Most high street building societies only accept first mortgages.

Fixed-rate mortgage

A mortgage where the rate of interest is fixed for a set period.

Flexible loan

A loan that permits you to increase or decrease the amount borrowed, or to vary the repayments, or to miss the occasional payment, as set out in the Credit Agreement.

Fixed Rate

An interest rate which is fixed for a set period.

Forced sale value (FSV)

Credit slang term for what mortgage lenders expect a property to reach if sold after repossession. As a rule of thumb, this is around 70% of the market value.

FSA

Stands for Financial Services Authority

FSV

Stands for Forced sale value

Full payer

Credit slang for someone who pays their credit card balance in full each month (and is therefore not very profitable to them). See Extended Credit Taker.

Further advance

A loan given by a lender in the middle of the term of an existing loan.

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GAIN

Stands for Gone Away Information Network

Garnishee order

A remedy after judgment, whereby a lender can serve this on your bank and claim any monies in your accounts in repayment of a debt.

General Insurance Standards Council (GISC)

An independent non-statutory organisation that regulates the sales, advice and service standards of its members. GISC members may be insurers or intermediaries or others involved in general insurance such as claims handlers. The main purpose is to ensure that general insurance consumers are treated fairly.

Geodemographic data

The description of individual postcodes into one of 50 standard categories, based upon census data and consumer questionnaires. Mostly used by marketing people, but also used as a component of some credit scorecards.

GISC

Stands for General Insurance Standards Council.

Gone Away Information Network (GAIN)

A trade organisation that shares details of customers who have statements and other correspondence returned undelivered by the Post Office, marked ‘gone away’.

Guarantor

Someone who agrees to pay if you don’t. Usually a parent or relative. If they do pay, they acquire rights to sue you personally. If you are thinking of agreeing to be a guarantor, think carefully. The best advice is don’t unless you are very, very sure of the person you are being asked to guarantee. See joint and several.

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Health Insurance

Insurance sometimes offered by lenders which provides financial protection in case of sickness or accidental injury. Generally poor value. Your chances of obtaining credit are no different if you take this option up or not.

Household score

The credit score that relates to you, anyone connected to you and anyone sharing the same surname and who has ever lived in the same house as you.

Higher lending fee

An extra charge made by lenders on loans that are more than 90% of the value of a property. See also mortgage indemnity insurance.

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Impaired credit

Someone with defaults or judgments or insolvency recorded on their credit report.

ICM

Stands for Institute of Credit Management

Income protection policy

See Mortgage Payment Protection

Independent Financial Adviser

A person authorised to sell or advise on the policies offered by insurance companies, as well as other financial service providers, such as those provided by banks and building societies. See Broker.

Indemnity policy

Home contents insurance that only covers you for the second-hand value of you possessions.

Insight

Equifax’s combined database of the payment history of individuals provided monthly by around 200 lenders to its data sharing club. This information is shared with your consent, which you normally give when you apply for credit. It is used primarily for the assessment of credit applications, in particular to help prevent over-indebtedness, for the prevention and detection of fraud and for the tracing of gone aways.

Insolvency

Inability to pay debts as they fall due. See bankruptcy, sequestration, IVA, Administration Order and Trust Deed, all of which are forms of insolvency.

Institute of Credit Management.

The professional membership body that represents the credit industry and provides technical guidance, professional qualifications and recruitment services.

IFA

Stands for Independent Financial Adviser - someone authorised to sell or advise on the policies offered by insurance companies, as well as other financial service providers, such as banks and building societies. See Broker.

Individual Savings Account (ISA)

A type of savings or investment account which is exempt from income and capital gains tax. You can use it to save cash or to invest in stocks and shares.

Intermediary

See Broker.

Interest

The charge made for borrowing a sum of money.

Interest-free Credit

A type of credit offered by stores where you pay for your purchases in equal instalments over a set period of time, usually 6 to 12 months, and on which no interest is added.

Interest-only mortgage

A mortgage where you pay just interest on the mortgage, and where the capital is expected to be repaid by an insurance policy (an endowment mortgage), the proceeds of a pension pay-out (a pension mortgage) or from some other investment at the end of the mortgage term.

ISA

Individual Savings Account - A savings or investment account which is exempt from income and capital gains tax. Can be in cash or in stocks and shares.

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Joint and several

A legal term which sets out who is liable on a joint account or joint debt. Joint and several means that the lender can pursue you for repayment either separately, or against both of you, as it likes.

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Kerbside valuation

A cheap ‘drive-past’ valuation by an agent of a mortgage lender to check the condition and value of a property, used particularly for further advances on an existing mortgage. Unreliable in terms of ascertaining the actual market value and inappropriate if you need to know more about the structure of the property. See Mortgage Valuation and Structural Survey.

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Lending multiplier

See Multiplier

Liability

A debt.

Lien

A banker’s equivalent of ‘possession is 9/10ths of the law’. For some short term credit facilities a bank may ask that a life policy, or shares, or similar, are deposited with the bank. The bank establishes what is known as an equitable lien – a form of security – over the object deposited. The bank does not, however, have any power of sale.

LTV

Loan to Value – a credit slang term often used in mortgage finance. The LTV is a ratio - the amount of a mortgage expressed as a percentage of the value of the property's value, or what you pay for the property. The higher the LTV, the more costly the mortgage, generally speaking.

Lump Sum reduction

The term used if you wish to pay off a large part of your mortgage early. Be careful, always ask whether there is an early repayment penalty, before you do this.

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Money Laundering

Annoying checks that the law requires all banks to make before they are allowed to take money from you. The same law applies to anyone who takes money, including building societies, solicitors and accountants. The checks are made to make sure you are genuinely who you say you are. The aim of money laundering checks is to stop ‘ill-gotten gains’ getting into the banking system. Money laundering checks may include requiring you to produce your passport, driving licence, recent bank statements together with enquiries made of the credit reference agencies. These checks are undertaken on absolutely everyone. A money laundering check does not mean you are suspected of anything illegal. The money laundering checks made at credit reference agencies leave an ‘enquiry footprint’ – an indelible record so that you can see who has checked you out. The enquiry footprint does not have any impact on your credit score or on your ability to get credit.

Mortgage

Literally means ‘dead deed’. Basically, when you are loaned money to buy a property, you sign a mortgage which conveys the property to the lender, but giving you the right to occupy it so long as you keep up repayments, and once you have repaid the loan, the lender then releases the mortgage which effectively conveys it back to you. If you don’t keep up repayments, the lender takes possession back – known as re-possession.

Mortgagee

The lender who gave you a mortgage.

Mortgage indemnity insurance

An insurance premium sometimes required by a mortgage lender if you are borrowing more than a certain percentage of the value of your home – usually 75%. The idea is that if the value of the property falls beneath 75% of the original valuation for any reason, the insurance will pay out. In the unfortunate event that that happens, the insurance company will usually pursue you for the amount they paid the lender, even though you paid the premium yourself. Shop around – some lenders do not require mortgage indemnity insurance.

Mortgage payment protection

An optional insurance policy made available on credit applications that covers repayments for a limited period if you have an accident, fall sick or become unemployed. Generally giving very poor value for money, best avoided. Opting to take this insurance will not affect your chances of getting credit (by law).

Mortgage valuation

A valuation, carried out by an agent appointed by and acting on behalf of your mortgage lender, of the property that you want to buy. This is not a survey and should not be relied on as such. See Kerbside valuation and Structural Survey.

Mortgagor

A person who has borrowed money against a mortgage over their property.

Multiplier

Credit slang for the way that the maximium amount of mortgage is worked out. For example, a lender may lend up to 3 times first income and 1 times the second income, or 2 ½ times joint income. These figures are known as multipliers.

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Negative Equity

The difference between the value of your house and your mortgage, when the value is less than the mortgage outstanding.

Non-status Mortgage

Mortgages offered by lenders where proof of proof of income is not required to be demonstrated, so useful for self-employed persons. Usually restricted to a maximum LTV of 70% or so.

Notice of correction

The Consumer Credit Act 1974 gives you the option of recording up to 200 words on your credit report. Most people have nothing recorded, and the facility is often used to explain disputes. Credit reports containing Notices of Correction cannot be assessed using credit scoring and instead must be manually assessed, which is less efficient and leads to higher levels of declined applications.

Notice of default

A formal letter from a lender sent when you fall in arrears. The notice sets out the arrears and what you have to do to put things right, within 28 days. Failure to respond to a notice of default results in a default, which appears on your credit file for six years, irrespective of whether you subsequently pay the account in part or in full.

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Offset mortgage

Allows you to set-off the balance of your mortgage against any money you have in your current account (held with the same lender). You pay interest on the net amount, so your mortgage, in theory at least, should repay earlier than expected.

Ombudsman

An independent body appointed to rule on disputes, to try to prevent matters going to court.

Oral examination

This is another remedy after judgment which a lender can seek from the Courts once it has judgment. It is an order for you to attend court and be examined under oath to declare your assets and liabilities. A lender will then need to apply for another remedy after judgment depending on what you declare. If you do not turn up for the oral examination, in theory a warrant for your arrest and imprisonment may follow.

Overdraft

An agreement by your bank for you to take more money from your current account than you have in it.

Overdraft limit

The maximum amount that your bank is prepared for you to borrow from your current account.

Overpayment

A term used in mortgage lending where a lender makes voluntary repayments at more than the contracted level. Before you think about doing this, make sure you obtain confirmation in writing that this will not give rise to an early repayment penalty.

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P60

A statement given to you by your employer in April each year showing how much you were paid and what tax you coughed up on it. Used by underwriters to check that what you said in your application form is true.

Payment Holiday

A feature offered by some mortgages that allow you to miss the occasional monthly payments on a mortgage. Beware – a few lenders record this on your credit report as an arrangement to pay – ask for clarification on how this will be recorded on your credit report before you take advantage of it.

Payment protection

See Mortgage payment protection.

Pension Mortgage

A type of interest only mortgage where the capital is repaid from the proceeds of a pension.

Personal Loan

See unsecured loan.

Plastic

Credit slang for credit card.

Portable mortgage

A mortgage that can be transferred when you move house, subject to specific conditions set out by a lender.

Principles of Reciprocity

The rules that govern data sharing of your payment history, overseen by SCOR.

Proof of income

When mortgage lenders ask for this, it usually means your last 3 months’ pay slips, and P60. Some also ask to see your recent bank statements so they can see the monthly credit to your account.

Propensity score

A type of credit scorecard that typically predicts your likelihood of using a credit facility if you are given one. For example, people who use credit cards to borrow money and pay off only the minimum amount will be very profitable compared to someone who pays off the balance in full every month, so a propensity scorecard will help determine how profitable a new account might be.

Protective Registration

A type of CIFAS entry, in this case a warning placed on a credit report by a consumer asking lenders to be especially vigilant as the consumer is concerned that he or she is at risk of identity fraud. One of several CIFAS fraud categories, Protective Registration (Category 0), alongside Victim of Impersonation (Category 2) are the only two that are visible to consumers on credit files.

Public information

In credit report terms, this means the electoral roll, the insolvency registers and court judgment information.

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Redemption penalty

A fee charged by a lender if you repay a loan or mortgage earlier than the agreed term. For mortgages, this cannot be more than the figure agreed in the mortgage agreement.

Refinancing

The re-arrangement of loans or other credit either to obtain further money or to reduce repayments. See consolidation loan.

Remortgage

Switching mortgage lenders without moving house.

Repayment mortgage

Another term for Capital and Interest Mortgage.

Repossession

The act of a mortgage lender evicting you and then selling the property to obtain repayment.

Reciprocity

See data sharing.

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Schumer box

A prominent box on US credit application forms that shows clearly the costs of credit and in particular, any fees charged for late payments, bounced cheques, duplicate statements and other aspects.

SCOR

Stands for Standing Committee on Reciprocity. The informal committee that governs the rules that surround data sharing, known as the Principles of Reciprocity.

Searches

There are two basic types of search footprints recorded on your credit report, an application search and an enquiry. Only application searches are seen by lenders, so that they can make an assessment of how ‘credit active’ you are. There are lots of myths about the problems caused by having several credit application searches recorded on your credit file. Certainly, many searches within an hour or two can indicate a possible fraud, and dozens in a month can indicate financial desperation, but up to about 12 searches on file in a year is perfectly normal and is expected. Very low levels of searches can tell lenders that you are not very credit active, so they may not be so willing to lend to you.

Search footprint

Each time someone searches your credit report, a record is left at the credit reference agency they search. This is called a search footprint. Search footprints include Enquiries, or Application Searches, depending on whether the search relates to a casual quotation enquiry, or a full blown credit application. Only Application Searches affect your credit scoring, although lenders made decline to assist you if Enquiry Footprints, relating to Debt Collection, are present.

Second mortgage

A mortgage that was given after a first mortgage, and ranks behind the first mortgage in terms of who gets the money if the property is sold in repossession. Second mortgages tend to be a lot more expensive than first mortgages to reflect this risk. Consider asking the first mortgage holder (usually a building society) to give you a (cheaper) further advance before considering a second mortgage.

Secured loan

A loan where a lender has the comfort of security to rely upon if you don’t keep payments up.

Security

An asset that you lodge with a lender (see lien) or give a mortgage over, so that if you fail to pay, the lender can sell to repay the loan.

Self-certification

A term used in mortgage lenders for the process of not checking income against bank statements or P60s. See also non-status mortgage.

Sequestration

Scottish term for an insolvency similar to bankruptcy.

Set-off

Combine a loan with a credit account to find the net amount owing or due. See Offset mortgage.

Share

In credit terms, Callcredit’s combined database of the payment history of individuals provided monthly by around 200 lenders to its data sharing club. This information is shared with your consent, which you normally give when you apply for credit. It is used primarily for the assessment of credit applications, in particular to help prevent over-indebtedness, for the prevention and detection of fraud and for the tracing of gone aways.

Shared equity

A mortgage scheme where the borrower purchases part of a property and the other part is purchased by a third party, such as a housing association. This differs from shared ownership in that no rent is paid to the third party for their share. Any future increase in the property value is shared between both parties in proportion to their share.

Shared Ownership

A similar mortgage scheme to shared equity, the difference being that the third party receives monthly rental from the borrower in respect of their share in a property and does not therefore share in any future increase in the property value.

Sharking

Sharp practice used by normally respectable lenders and card companies to try to get you to purchase things you don't need like Accident Sickness and Unemployment Insurance. Typically your loan application will be approved, but instead of telling you this, you will told that your application has been 'referred' and to call a number. When you call you'll be asked loads of questions that you will, quite naturally, answer willingly, and at the end of the call the lender will suggest that you add Payment Protection Insurance to your loan (which will add up to 30% to the cost of the repayment with no great benefit to you). Just go through the pantomime process, keep your cool and just say no. You'll probably still get the loan.

Shortfall

Credit slang for any loss between the sale proceeds of a property following repossession, and the mortgage debt. You are liable for the shortfall for at least six years.

Standard variable rate

An interest rate set by and charged by each lender, which varies more or less in line with Base Rate.

Status report

Sometimes known as a status enquiry. A type of bank reference made on a company or partnership.

Sub prime credit

Industry slang for people with a less-than-perfect record of repaying their credit commitments. Can also refer to late payments, defaults, judgments, repossessions and other ‘adverse’ items on a credit file. See also Adverse credit.

Subsequent mortgage

A mortgage that is granted after the first mortgage and second mortgage. See Second Mortgage.

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Third party data (TPD)

Information that appears on your credit report when lenders search you, unless you have either specifically made a disassociation, or if you have specifically elected not to be judged on the merits of your entire household. Third party data is any financial information relating to anyone with the same surname as you who lives, or has lived, in the same household, and anyone else known to be financially connected to you for any reason.

Title Deed

A document that records the extent, nature, ownership and any interests in a property. In England and Wales, this is usually a Land Certificate issued by HM Land Registry. If there is a mortgage outstanding, this converts to a Charge Certificate and is usually held by the mortgage company.

TPD rules

A set of rules made by lenders between themselves about how and when Third Party Data can be used.

Tracker mortgage

Tracks movements in the Bank of England base rate so that you benefit quickly from a fall in interest rates.

Trade organisation

A body that represents the interests of groups of competing companies. Typical bodies are the British Bankers’ Association (BBA) and the Finance and Leasing Association (FLA).

Trust Deed

Scottish term for a type of IVA or Administration Order.

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Underwriters

In credit, the people who subjectively assess your application.

Unsecured loan

A personal loan that is not secured by a mortgage over your house.

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Valuation

An estimate of the value of a house, usually undertaken by a chartered surveyor, to establish its suitability as security for a lender.

Victim of Impersonation

A type of CIFAS fraud warning, denoting that the consumer is a Victim of Impersonation fraud. One of several CIFAS fraud categories that are seen by members of CIFAS when they search your credit file, although only two categories, Protective Registration (Category 0), alongside Victim of Impersonation (Category 2) are visible to consumers on credit files.

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Wait period

A term used in Accident, Sickness and Unemployment insurance and Payment Protection Insurance. Basically the time you have to wait between suffering the insurable issue and the insurance company paying up. Usually three months, by which time you will probably have recovered, got a job, died or won’t care much. One of the reasons why such insurance offers poor value.

Warrant of Execution

This is another remedy after judgment which a lender can seek from the County Courts once it has judgment. It is an order to Bailiffs to seize and sell your possessions. Bailiffs must give you prior notice of their intention to ‘levy execution’ of the warrant, which must not be for more than £5,000.

Wescore

A bureau score distributed in the UK by credit reference agency Equifax.

Writ of Fi Fa

This is another remedy after judgment which a lender can seek once it has judgment. A writ of fi fa (short for the Latin term fieri facias) is the High Court equivalent of a warrant of execution. It is an order to the Authorised High Court Enforcement Officer to seize and sell your possessions. A writ of fi fa can only be issued for the full judgment debt and must be for a minimum of £600 (no maximum). Unlike a warrant of execution, no notice is required to be given.

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z-score

An early form of credit scoring developed in the US to predict company failure.

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