Capacity: Your ability to make your mortgage payments on time.

Collateral: An asset that is pledged as security for a loan. The borrower risks losing the collateral if the loan is not repaid according to the terms of the loan agreement. In the case of a mortgage, the collateral would be the house and real property.

Co-signer: A person, also known as a co-borrower or co-applicant, who assumes equal responsibility for payment of the debt.

Creditor: A person who extends credit to you and to whom you owe money.

Credit report (also called a consumer report): Information, provided by a credit bureau, about a consumer's creditworthiness, credit standing, credit capacity or other characteristics that is used for the purpose of serving as a factor in establishing the consumer's eligibility for credit. In short, a credit report provides information about, among other things, money that you've borrowed from credit institutions and your payment history.

Credit reporting agency: A firm that collects, sorts and sells information about an individual's credit history.

Credit score: A numerical score that sums up - at a point in time - what your past and current credit usage predicts about your future credit performance based on statistics. The better your history of credit, the higher your score. A credit score is sometimes referred to as a FICO score.

Lien: A claim or charge on property for payment of a debt. With a mortgage, the lender has the right to take the title to your property if you don't make the mortgage payments.

Permissible purpose: The legally acceptable purpose(s) a creditor or organization has to obtain a person's credit report. For example, when you apply for credit, you are giving your potential creditor the legal right to obtain your credit report.

Repossess: In the event of nonpayment of your credit obligation, a creditor's legal right to take the asset you have pledged as collateral and sell it to pay off the credit obligation.