understanding credit - a beginner's guide
balance: the amount of a loan still to be repaid. If a debtor received credits for 1,000 USD and repaid 600 USD in principal, the balance is 400 USD plus applicable interest.
bankruptcy: depending on the context, either the inability to repay a loan or the formal liberation, through the judicial process, of the obligation to repay a loan.
Basel II: an international standard that calls for greater transparency, liquidity, and solvency in national banking sectors; known more formally as the Revised Basel Capital Framework. The Kyrgyz Republic has adopted Basel II, which will enter into force in 2006.
black list: a compilation of debtors with negative credit histories.
collateral: possessions, often in the form of real property, that a debtor agrees to forfeit to a creditor if he materially breaches the conditions of a loan agreement; also referred to as "pledge."
collection agency: a specialized company that recovers debts following default. In some cases the debtor is financially liable for both the unpaid portion of loan (together with interest) and fees charged by the collection agency.
confidentiality: the strict requirement for a credit bureau to disclose loan information exclusively within a data-exchange system; also known as "banking secrecy." Ishenim only issues a credit history: first, to a member; and second, when that member is considering an application for credits.
consent: the clause contained in a loan agreement giving the lender permission to transfer information on that loan to a credit bureau, which has a corresponding right to include that information in a credit history.
credit: the provision of goods or services on the expectation of future repayment.
credit bureau: an organization that compiles and issues credit histories; also referred to as a "consumer reporting agency."
credit card: a means of electronic payment. A true credit card is "unsecured," meaning that the issuer does not demand collateral from the holder.
credit history: a record of an individual's or business's past pattern of repaying or failing to repay loans and other debts, such as utility bills.
credit inquiry: the request by a lender or a credit report, which request might later be included in a credit history. The instances in which a lender may issue a credit inquiry are defined by law.
credit limit: the maximum loan that a lender is willing to issue; sometimes referred to as a "debt ceiling."
credit register: a database of credit histories maintained by the public sector, normally by the National or Central Bank. A credit register normally serves a narrower function than does a credit bureau.
credit report: the document containing a credit history, provided to lender in the circumstances permitted by law.
credit score: a mathematical expression of creditworthiness (e.g., 7.8 points out of a possible maximum of 10); also known as a "scoring system." Compilation of both negative and positive data over an extended period of time is necessary to generate a credit score.
creditor: a person or organization that has made a loan.
credit union (CU): a group of physical persons who pool their resources to make loans. Under the Law of the Kyrgyz Republic "On Credit Unions", a CU must have at least 10 members.
creditworthiness: the propensity of a loan applicant to repay loans according to his or her obligations.
current report: information concerning creditworthiness (e.g., subsequent attempts to acquire credits from other sources) that is provided to a lender after conclusion of a loan agreement; also called "monitoring." Ishenim's kolokol dynamic risk assessment™ service is a current report.
debit card: a means of electronic payment that immediately subtracts money from a bank account. Cards issued by banks in Kyrgyzstan are debit rather than charge cards.
debt-to-available credit ratio: outstanding debt in proportion to credit limit. If a debtor owes €200 and together with loans and credit cards could charge a total of €1,000, his debt-to-available-credit ratio is 1:5. Lenders use this information as a risk-analysis tool.
debtor: a person who has received goods or services on credit, or who has a loan.
default: the second stage following the failure to repay a loan on time. Default is more serious than delinquency. It can result in submission of a loan to a collection agency, and when reflected in a credit report may result in the inability to obtain future credits.
delinquency: the first stage following the failure to repay a loan on time. Debt obligations that are 30 to 120 days late are marked as delinquent and constitute negative data in credit histories.
dispute: a disagreement over the content of a credit history.
downscaling: the trend for commercial banks to compete with MFIs in the micro-lending segment.
encryption: the process of protecting information by storing it in a coded form. In the event of theft, encrypted data is unrecognizable.
identity authentication: verification that a loan application is who she says she is, normally established by confirmation of biographic data such as date of birth and passport number.
installment loan: a debt that is repaid in parts over a period of time (e.g., on the last day of each month).
interest: roughly speaking, a lender's profit from making a loan. If credits are issued in the amount of ?500 with an interest rate of 20%, the lender will receive the original ?500 plus ?100 in interest.
lease, leasing, lease agreement: a contractual relationship that gives the right to use, but not own, moveable or immoveable property. Leases are rendered on the basis of credit.
leverage: debt. A "highly leveraged" company has considerable debt.
micro credit: By common usage, a loan in an amount up to 500 USD. Some lenders issue "micro credits" in excess of this limit.
microfinance agency (MFA): according to Kyrgyz law, a non-commercial microfinance institution.
microfinance company (MFC): according to Kyrgyz law, a commercial microfinance institution.
micro-finance institution (MFI): a lender that issues micro credits. This category includes both micro-finance companies (MFCs) and micro-finance agencies (MFAs).
mortgage credit: a loan given for the purchase of immovable property; also called a "real estate loan."
negative information: data on the failure of a debtor to fulfill his obligations according to the terms of a loan agreement.
neutrality: the requirement that a credit bureau treat its members completely equally, and not give any advantage to one or several but not the rest.
positive information: data on the fulfillment of a debtor of her obligations according to the terms of a loan agreement.
principal: the amount of a loan exclusive of interest.
rating agency: a business that evaluates the financial stability of nations and large corporations. Credit bureaus normally concentrate on small and medium-sized enterprises, and therefore do not have such information in their databases.
reciprocity: the strict requirement for a credit bureau to provide credit histories only to institutions that contribute data.
restructuring: changes to repayment obligations of a loan agreement, made either directly between the creditor and debtor or with judicial supervision. Restructuring can constitute negative data.
risk analysis: a lender's process of determining the creditworthiness of a loan applicant, and/or the related decision to issue or not to issue credits.
secured debt: loans issued against collateral.
technical credits: loans given to finance the purchase of office equipment, such as computers. Not all lenders issue this type of loan.
public record: data that under law is available to a credit bureau and may be included in credit histories.
unsecured debt: loans issued exclusively on the expectation of future repayment (i.e., without collateral).
usury: an interest rate in excess of the amount permitted by law.
balance: the amount of a loan still to be repaid. If a debtor received credits for 1,000 USD and repaid 600 USD in principal, the balance is 400 USD plus applicable interest.
bankruptcy: depending on the context, either the inability to repay a loan or the formal liberation, through the judicial process, of the obligation to repay a loan.
Basel II: an international standard that calls for greater transparency, liquidity, and solvency in national banking sectors; known more formally as the Revised Basel Capital Framework. The Kyrgyz Republic has adopted Basel II, which will enter into force in 2006.
black list: a compilation of debtors with negative credit histories.
collateral: possessions, often in the form of real property, that a debtor agrees to forfeit to a creditor if he materially breaches the conditions of a loan agreement; also referred to as "pledge."
collection agency: a specialized company that recovers debts following default. In some cases the debtor is financially liable for both the unpaid portion of loan (together with interest) and fees charged by the collection agency.
confidentiality: the strict requirement for a credit bureau to disclose loan information exclusively within a data-exchange system; also known as "banking secrecy." Ishenim only issues a credit history: first, to a member; and second, when that member is considering an application for credits.
consent: the clause contained in a loan agreement giving the lender permission to transfer information on that loan to a credit bureau, which has a corresponding right to include that information in a credit history.
credit: the provision of goods or services on the expectation of future repayment.
credit bureau: an organization that compiles and issues credit histories; also referred to as a "consumer reporting agency."
credit card: a means of electronic payment. A true credit card is "unsecured," meaning that the issuer does not demand collateral from the holder.
credit history: a record of an individual's or business's past pattern of repaying or failing to repay loans and other debts, such as utility bills.
credit inquiry: the request by a lender or a credit report, which request might later be included in a credit history. The instances in which a lender may issue a credit inquiry are defined by law.
credit limit: the maximum loan that a lender is willing to issue; sometimes referred to as a "debt ceiling."
credit register: a database of credit histories maintained by the public sector, normally by the National or Central Bank. A credit register normally serves a narrower function than does a credit bureau.
credit report: the document containing a credit history, provided to lender in the circumstances permitted by law.
credit score: a mathematical expression of creditworthiness (e.g., 7.8 points out of a possible maximum of 10); also known as a "scoring system." Compilation of both negative and positive data over an extended period of time is necessary to generate a credit score.
creditor: a person or organization that has made a loan.
credit union (CU): a group of physical persons who pool their resources to make loans. Under the Law of the Kyrgyz Republic "On Credit Unions", a CU must have at least 10 members.
creditworthiness: the propensity of a loan applicant to repay loans according to his or her obligations.
current report: information concerning creditworthiness (e.g., subsequent attempts to acquire credits from other sources) that is provided to a lender after conclusion of a loan agreement; also called "monitoring." Ishenim's kolokol dynamic risk assessment™ service is a current report.
debit card: a means of electronic payment that immediately subtracts money from a bank account. Cards issued by banks in Kyrgyzstan are debit rather than charge cards.
debt-to-available credit ratio: outstanding debt in proportion to credit limit. If a debtor owes €200 and together with loans and credit cards could charge a total of €1,000, his debt-to-available-credit ratio is 1:5. Lenders use this information as a risk-analysis tool.
debtor: a person who has received goods or services on credit, or who has a loan.
default: the second stage following the failure to repay a loan on time. Default is more serious than delinquency. It can result in submission of a loan to a collection agency, and when reflected in a credit report may result in the inability to obtain future credits.
delinquency: the first stage following the failure to repay a loan on time. Debt obligations that are 30 to 120 days late are marked as delinquent and constitute negative data in credit histories.
dispute: a disagreement over the content of a credit history.
downscaling: the trend for commercial banks to compete with MFIs in the micro-lending segment.
encryption: the process of protecting information by storing it in a coded form. In the event of theft, encrypted data is unrecognizable.
identity authentication: verification that a loan application is who she says she is, normally established by confirmation of biographic data such as date of birth and passport number.
installment loan: a debt that is repaid in parts over a period of time (e.g., on the last day of each month).
interest: roughly speaking, a lender's profit from making a loan. If credits are issued in the amount of ?500 with an interest rate of 20%, the lender will receive the original ?500 plus ?100 in interest.
lease, leasing, lease agreement: a contractual relationship that gives the right to use, but not own, moveable or immoveable property. Leases are rendered on the basis of credit.
leverage: debt. A "highly leveraged" company has considerable debt.
micro credit: By common usage, a loan in an amount up to 500 USD. Some lenders issue "micro credits" in excess of this limit.
microfinance agency (MFA): according to Kyrgyz law, a non-commercial microfinance institution.
microfinance company (MFC): according to Kyrgyz law, a commercial microfinance institution.
micro-finance institution (MFI): a lender that issues micro credits. This category includes both micro-finance companies (MFCs) and micro-finance agencies (MFAs).
mortgage credit: a loan given for the purchase of immovable property; also called a "real estate loan."
negative information: data on the failure of a debtor to fulfill his obligations according to the terms of a loan agreement.
neutrality: the requirement that a credit bureau treat its members completely equally, and not give any advantage to one or several but not the rest.
positive information: data on the fulfillment of a debtor of her obligations according to the terms of a loan agreement.
principal: the amount of a loan exclusive of interest.
rating agency: a business that evaluates the financial stability of nations and large corporations. Credit bureaus normally concentrate on small and medium-sized enterprises, and therefore do not have such information in their databases.
reciprocity: the strict requirement for a credit bureau to provide credit histories only to institutions that contribute data.
restructuring: changes to repayment obligations of a loan agreement, made either directly between the creditor and debtor or with judicial supervision. Restructuring can constitute negative data.
risk analysis: a lender's process of determining the creditworthiness of a loan applicant, and/or the related decision to issue or not to issue credits.
secured debt: loans issued against collateral.
technical credits: loans given to finance the purchase of office equipment, such as computers. Not all lenders issue this type of loan.
public record: data that under law is available to a credit bureau and may be included in credit histories.
unsecured debt: loans issued exclusively on the expectation of future repayment (i.e., without collateral).
usury: an interest rate in excess of the amount permitted by law.
