Benefit CorporationA benefit corporation is a fairly new type of corporate entity created by the IRS that is a for-profit entity that must also include a positive impact on society as part of its legally defined goals.  Benefit Corporations require yearly audits from external sources that officially acknowledge that the company is adhering to its goals to benefit the community.

Credit Score
A credit score is a rating that is generated by a mathematical algorithm based off of information from your credit history.  It is a three-digit number used as a predictive rating to determine a borrower’s creditworthiness.  This allows lenders to determine the risk involved in lending to you, based on the factors making your score.  Things such as being late on payments, defaulting on loans, going to collections, and much more all go onto your Credit Report (see below) and are used to calculate your score. Personal or demographic information such as age, race, address, marital status, income and employment don’t affect the score.

There are well over 50 different types of credit-scoring models being used in the industy, but the by far the two most popular ones are FICO 8.0 and Vantage 3.0.  Most lending institutions have their own models but are usually a more specific and customized version of either a FICO or VantageScore model.

Credit scores can be broken down as follows; Payment History (35%), Amounts Owed (30%), Length of Credit History (15%), Types of Credit Used (10%), New Credit (10%).  This breakdown was based on a FICO score and while a VantageScore would be fairly similar, there are some small differences.

Credit Report – 
A credit report is a in-depth and detailed report comprised of a person’s credit history. The credit bureaus (such as TransUnion, Experian, and Equifax) collect your credit data and bill-paying habits, which is reported to them from the lenders that people do business with.  This information is used to create unique personal reports that other lenders can use to determine loan applicants’ creditworthiness to lower the risk of lending.  Because lenders are not required to submit information to all the bureaus, some only submit to one or the other.  Because of this, not all of the reports share the same information and it is common for there to small differences amongst the three reports.

Credit Bureau – 
A company that collects information relating to the credit ratings of individuals and makes it available to credit card companies, financial institutions, lenders, etc.  The three major credit bureaus in the United States are TransUnion, Experian, and Equifax.

TransUnion – 
TransUnion is a credit bureau that operates out of the United States, but whose operations extend to 33 countries worldwide.  TransUnion is one of the worlds largest intelligence providers, maintaining one of the largest collections of consumer information.  They are one of the three major credit bureaus in the US, with the other two being Experian and Equifax.

Experian – 
Experian is a credit bureau that is based out of Dublin, Ireland with operational offices in the US, UK, and Brazil. Experian has a presence in 37 countries worldwide, making them one of the largest intelligence providers in the world.  They boast claims of maintaining records for over 22 million people.  They are one of the three major credit bureaus in the US, with the other two being TransUnion and Equifax.

Equifax – 
Equifax is a credit bureau that is based out of the United States, with operational offices in 27 other countries.  Equifax claims to hold consumer records on near 1 billion people (820 million).  They are on e of the three major credit bureaus in the US, with the other two being TransUnion and Experian.

FICO is the largest and best known of several companies that provide software for calculating a person’s credit score.  FICO stands for Fair Isaac Company (CO) and is most well known for the creation of the FICO Score.  A variation of a FICO score is used in most lending industries (home loans, car loans, credit cards, etc.) when determining a consumers creditworthiness.

VantageScore – 
VantageScore is one of the largest and most popular consumer credit-scoring models, second to the FICO score.  VantageScore was created through a joint venture of the three major credit bureaus (Equifax, Experian, and TransUnion).  VantageScore models compete with the credit scoring models produced by Fair Isaac Corp, FICO.  While not being used as often professionally, VantageScores are more widely used by the consumers as they are more regularly available without cost.

Creditworthiness –  
is a valuation performed by lenders that determine the possibility a borrower may default on his debt obligations. It considers factors, such as repayment history and credit score.

Hard Inquiry
A hard inquiry takes place when a lender, such as a credit card company or car dealership, run a credit check on a consumer prior to making a decision.  Because these inquiries are usually responsible for a decision on a larger amount of financing and are often the information from which interest rates and limits are set, they are more in-depth checks that can lower your credit score by a few points.  Multiple inquiries of this nature within a short amount of time can have significant negative effects on your score.  Because of this, more often than not, you have to authorize them to be able to run a hard inquiry.  Most common hard inquiries come from loan companies, mortgage companies, credit card issuers, and car dealerships.

Soft Inquiry – 
A soft inquiry takes place when a person or company runs a credit check as part of a background check.  This often happens during pre-approval processes, and do NOT affect your credit score in any way.  Because of that, soft inquiries can be performed without your permission. – is the official site to get your free annual credit reports. This right is guaranteed by Federal law.  This site is maintained by Central Source, LLC. Central Source, LLC is sponsored by Equifax, Experian and TransUnion so you have a single site where you can ask for all three of your free credit reports.  Get all 3 reports, one from each of the major 3 credit bureaus, free of charge once every 12 months.

Federal Trade Commission (FTC)
 Regulates any financial company not covered by the other federal regulators, like mortgage brokers, tax and investment services, finance companies, credit reporting companies, nonbank lenders, auto dealers, leasing companies, appraisers, real estate settlement services, credit counseling services, and collection agency services

Consumer Response Center
600 Pennsylvania Avenue, NW
Washington, DC 20580
877-FTC-HELP or 877-382-4357 toll-free

Consumer Financial Protection Bureau (CFPB)
 The CFPB aims to make consumer financial markets work for consumers, responsible providers, and the economy as a whole. The CFPB protects consumers from unfair, deceptive, or abusive practices and take action against companies that break the law. They arm people with the information, steps, and tools that they need to make smart financial decisions.

Consumer Financial Protection Bureau
PO Box 2900
Clinton, IA 52733-2900
(855) 411-CFPB | (855) 411-2372 – 
Run by Office of the Comptroller of Currency, the OCC charters, regulates and supervises all national banks and federal savings associations as well as federal branches and agencies of foreign banks. The OCC is an independent bureau of the U.S. Department of the Treasury.

Debt Forgiveness – 
is the act of writing off all of (or a portion of) one or more loans by the creditor that owns the debt. The objective is either to provide relief or is a business tactic used to enable a struggling debtor to more easily pay off the remaining part of the loan(s) which the creditor feels they may not have been able to recover otherwise.  When debt has been forgiven, whether it is all or part, the amount that has been “forgiven” is treated as a capital transfer, or income, from the creditor to the debtor.

Cancellation of Debt (COD)
 is when a lender or creditor forgives a debt without requiring consideration in return. The amount of debt that is forgiven by the COD is considered income to the debtor and must be reported as a result.

Debt Settlement – 
is a method of debt management in which a reduced amount is agreed upon between the creditor and the debtor in which the reduced amount is considered “payment in full”.  A settlement will cause the debtor’s credit rating and score to go down significantly, as it is noted that the full amount originally owed was not met.  While settled accounts are often preferred to that of a bankruptcy, they do reflect as a negative mark on your credit report for seven years.

Debt Consolidation – 
is a form of debt refinancing that involves taking out one loan to pay off others.  This process usually offers a lower interest rate to all of the debts involved, while offering the convenience factor of only having to pay one loan versus multiple ones.  Debt Consolidation companies can often purchase the group of loans at a discounted rate by buying them out in full, and profit by having the consumer pay off the full amount.

Bankruptcy – 
Bankruptcy is a legal proceeding involving a person or business that is unable to repay outstanding debts. The bankruptcy process begins with a petition filed by the debtor, which is most common, or on behalf of creditors, which is less common. All of the debtor’s assets are measured and evaluated, and the assets may be used to repay a portion of outstanding debt.

Hardship Payment Plan – 
A hardship program is a form of short-term payment relief that is sometimes offered to consumers who are struggling to meet their financial commitments. These are typically administered in response to a job loss, medical circumstances, or other unforeseen financial difficulties. Typically, the creditor provides a lower interest rate along with some other concessions (for example: waived fees). These programs typically last between six months and one year and are usually dropped if the consumer misses a payment.

The program allows the consumer to retain a realistic pay schedule and overall level of financial commitment. At the same time, it helps the creditor ensure that it will continue to get steady payments from the debtor, and the creditor hopes that this leads to less complications than charging off the account, sending the account to collections, etc.

 VantageScores use this terminology in conjunction with Excellent, Good, Fair, Poor, and Bad.  Superprime would be the loose equivalent of an “Excellent” score and is for scores that fall between 781-850.

VantageScores use this terminology in conjunction with Excellent, Good, Fair, Poor, and Bad.  Prime could fall into a range of score types from “Good” to “Excellent” and is for scores that fall between 661-780.

Near Prime
 VantageScores use this terminology in conjunction with Excellent, Good, Fair, Poor, and Bad.  Near Prime could fall into a range of score types from “Fair” score and is for scores that fall between 601-660.

VantageScores use this terminology in conjunction with Excellent, Good, Fair, Poor, and Bad.  Subprime could fall into a range of score types from “Fair” to “Good” and is for scores that fall between 300-600.

No Credit – 
Consumers with limited credit history and do not return results on reports are often not able to generate a credit score.  FICO, for instance, requires the following in order to produce a FICO Credit Score;

  • At least one account opened for six months or more, and
  • At least one account that has been reported to the credit bureau within the past six months, and

Excellent Credit – 
Credit Scores that are 720 or higher are considered “Excellent”.

Good Credit – 
Credit Scores that fall between 640-719 are considered “Good”.

Fair Credit
 Credit Scores that fall between 550-639 are considered “Fair”.

Poor Credit – 
Credit Scores that are 549 or lower are considered “Poor”.

Fair Credit Reporting Act (FCRA)
 The FCRA protects the privacy of certain information distributed by consumer reporting companies, which gather and sell information about you, like where you live, how you pay your bills, and whether you’ve been sued or arrested, or have filed for bankruptcy. Under the law, consumer reporting companies can release your information only to third parties that have a permissible purpose to obtain it, like creditors, insurers, employers, and other businesses that use it to evaluate your applications for credit, insurance, employment, or renting a home. When a financial company gets your credit report, it may want to share that information with an affiliate — a company that owns your financial company, that your financial company owns, or that is part of the same parent organization or corporate family. Under the FCRA, however, if the financial company plans to share certain information — for example, from your credit report or your credit application — with its affiliates, it will usually first notify you and give you an opportunity to opt out. This notice is likely to be included in the privacy notice you get from the financial company under the GLBA.

Gramm-Leach-Bliley Act (GLBA)
 Under the GLBA, financial companies must tell you about their policies regarding the privacy of your personal financial information. With some exceptions, the law limits the ability of financial companies to share your personal financial information with certain non-affiliates without first notifying you about the sharing and providing you with an opportunity to opt-out. A non-affiliate is a company that is unrelated to your financial company.

Under the GLBA, your financial company can provide your personal financial information to certain non-affiliated companies, including service providers and joint marketers — companies that have an agreement with your financial company to offer you other financial products or services — without providing you with an opportunity to opt out. But before it shares your information with other third-party non-affiliates, your financial company must tell you about its information sharing practices and give you the opportunity to opt out.

Identity Theft – 
the fraudulent acquisition and use of a person’s private identifying information, usually for financial gain.

Phantom Debt – is debt that is old, may have expired, defaulted but is resurfaced and treated as active debt by debt collectors.  More often than not, the collectors are aware of the fact that the debt is invalid and cannot legally be collected but use the lack of awareness and harassment tactics to collect payments regardless.

Zombie Debt – Another name for “Phantom Debt”, labeled after the act of bringing “dead debt” back to life.

Bad Paper
– is an industry term for debt that is considered unlikely to be collected on as it has been sold from company to company many times and never collected on in previous attempts.

Proof of Settlement – is a reference to a document sent after an account has been closed to be used a proof should your debt ever resurface as zombie or phantom debt.  In Debt Forgiving’s usage, it is the document we send after your account has been closed showing that your debt has been “Paid as Agreed” which is legally different than “Settled”.