Consumer Credit Key Terms

Learn consumer credit terms including credit report and the Fair Credit Reporting Act

By Sandy Baker

Consumer credit is something many businesses have to handle on a daily basis. A business should understand the Fair Credit Reporting Act and the Equal Credit Opportunity Act. The business may need to obtain a copy of a credit report or perform an electronic fund transfer on behalf of the business owner. A consumer's credit is accessible to a business through credit reporting agencies. It is critical for a business owner to fully understand consumer credit prior to providing or using it.

Fair Credit Reporting Act (FCRA)

The Fair Credit Reporting Act is a federal law outlining the rights of the consumer. The law requires businesses to only report fairly on consumer credit reports. It also ensures the privacy rights of the individual.
Try: The Federal Trade Commission provides a detailed report of the Fair Credit Reporting Act.

Equal Credit Opportunity Act (ECOA)

The Equal Credit Opportunity Act is another federal law affecting business owners. This law prohibits a business from discriminating against applicants for credit based on sex, marital status, religion, age or race.
Try: The United States Department of Justice provides more information on the Equal Credit Opportunity Act.

Electronic fund transfer

An electronic fund transfer is the process of moving money directly from a consumer's account to a business. The Electronic Funds Transfer Act is a federal law governing the legal requirements of businesses in handling these types of transfers.
Try: The Federal Reserve provides a detailed example and description of an electronic fund transfer and more information on the Electronic Funds Transfer Act.

Credit report

The best way to manage consumer credit is to use a credit report. This report details the way a consumer uses credit, including secured and unsecured forms. It is often the tool used to determine if an individual is eligible for a loan. Businesses may access this report with written permission.
Try: The Federal Reserve Bank of San Francisco provides more details on the credit report.

Credit reporting agencies

Credit reporting agencies are the companies that gather information for credit reports. There are three major agencies in the United States: Equifax, Experian and TransUnion. A business may contact one of these agencies to obtain a credit report on a potential borrower.
Try: The Federal Deposit Insurance Corporation provides additional information about credit reporting agencies.

Credit score, FICO score, credit rating

A credit score is a numerical representation of the information on a credit report. The higher the score is, the better the individual's past credit performance. The score is comprised of payment history, the amounts owed on current loans, the length of credit history, the number of new credit accounts and the types of credit used.
Try: MyFICO offers a detailed explanation of the credit score.