Debt Management News

Please find here an easy to use and understand glossary of terms related to debt management.

Adverse Credit
Adverse credit is credit which is available to a person with an adverse credit history. That can be a person who has incurred defaults, or had a CCJ, or arrears placed on their record. This credit may be available at a higher interest rate than non adverse credit.

Arrears
Arrears occur when a repayment has been missed. For example a mortgage payment is scheduled to be monthly but one month the money is not available so the payment is not received by the mortgage lender - this account then enters in to an arrears status.

Bailiff
A bailiff is a person who is authorised to collect a debt on behalf of a creditor - usually appointed when a debt has been difficult.

CCJ's or County Court Judgments
A CCJ is a county court judgment. This happens when a creditor is unable to receive payment for their credit when expected despite requesting the payment. The creditor can then submit this debt to court using a claims request. This claim is then heard in court and a judgment passed to enforce payment of the debt. This will be recorded on credit rating and when paid off will be noted as satisfied. Once a CCJ has been issued, a bailiff can be appointed to collect the debt.

Credit Crunch
The Credit Crunch of 2007/2008 has involved many lending institutions reducing the amount of credit available or increasing the amount of criteria needed to be fulfilled in order to qualify for credit. Brought about by lending been seen as becoming increased risk.

Credit Rating
The credit rating system takes into account many factors and these are rated to give a score which is then used by financial institutions and creditors to assess how much credit, if any, to give to a customer. Items used to score the rating are: defaults, arrears, current credit, mortgage, overdraft, County Court Judgments, etc. Credit ratings are available from two companies, Experian and Equifax (see sections below for detail).

Creditor
A creditor is a person who is owed money i.e. they have credit available and have lent it to somebody else.

Debt
Debt is a sum of money owed - it can be in more than one place and these combined give a figure for total debt.

Debt Consolidation
Debt Consolidation is when more than one debt is brought together - usually by taking out further credit and using this to repay the existing debt. This means that in future the number of monthly payments are reduced, making it easier to assess your finances. It is possible to incur charges for this and this may also increase the level of debt.

Debtor
A debtor is a person who owes money to another company or person i.e. they are in debt.

Defaults
A default is a record on your credit rating of a missed payment. It can be recorded for any type of credit, including mortgage, store card, credit card, gas or utility bill etc.

Equifax
Equifax is one of the companies who provide credit ratings and have details of lending and payments of individuals and companies. They offer a service to the public to check their own credit rating to see any problems which have occurred. This is also becoming popular as a way of preventing against identity theft - being aware of your credit rating and history can help you to spot out of the ordinary purchases and available overdrafts against your name.

For more information please visit Equifax.

Experian
Experian is another company offering to provide credit ratings and credit history of individuals. For a small fee it is possible to request your own report and view your credit rating. For more information and details of how to request your report please visit Experian.

Insolvency Practitioner
An Insolvency Practitioner is an authorised representative who can arrange an IVA for an individual or a CVA for a company. They usually specialise within this area and will be qualified, usually as an accountant or solicitor.

IVA
An IVA or Individual Voluntary Arrangement is a legally binding agreement between a debtor and their creditors to repay their debt over a set period of time. Please view our what is an IVA section for more information.

Overdraft
An overdraft is usually provided by a bank and is an agreed amount of credit which is available when an account runs out of funds - usually based on the fact that the credit will be paid back in a short period of time.

Prime
A prime person/mortgage/lending agreement - is one with no adverse credit history or a very good credit rating. There may be no defaults, or CCJ's in the recent history of the credit rating.

Sub Prime
Sub Prime refers to an adverse credit history or non prime credit history. This is when the credit rating has some negative items against it - for example defaults, arrears, CCJ's etc all count as sub prime and can affect credit availability from some lenders.