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Glossary

What is a Credit Score?

A credit score is a numeric representation of a person's creditworthiness determined by a statistical formula that calculates likelihood of debt repayment. The most common formula used is the FICO, or Fair Isaac Corporation, score formula.    See...

What is Credit Utilization Rate?

Credit Utilization Rate is an important factor used by credit bureaus when determining credit scores that is calculated by dividing the total of all outstanding balances by the total of all credit limits for each account. Generally, higher...

What is a Custodial Account?

A custodial account is an account created for the benefit of a minor at a financial institution that typically can only hold mutual funds or other similar investments.   See Also: Your DIY Financial Planning Guide Top 8 Mistakes Investors Make...

What is Debt?

Debt is an amount of money owed by one party to another party. Debt can be represented by a loan note, bond, mortgage or other agreement that usually states repayment terms and, if applicable, interest requirements.    See Also: How I Ditched My...

What is Discretionary Income?

Discretionary income is any extra income a person can spend after they have taken care of their essential expenses like housing, utilities, transportation and childcare.    See Also: Your DIY Financial Planning Guide Ask An Advisor: Help! I'm...

What is Diversification?

Diversification is an investment portfolio strategy designed to reduce risk by combining a variety of investments, such as stocks, bonds, commodities and real estate, which are unlikely to move in the same direction or at the same rate....

What is Equity?

Equity is an ownership interest in a publicly-traded company represented in the form of common or preferred stock. Equity can also mean a person's total assets minus total liabilities (aka "net worth") or in terms of real estate, the difference...

What is Estate Tax?

Estate tax is a tax imposed by government (federal and possibly state) on the transfer of assets, typically exceeding a certain amount that changes over time, from a deceased person to their inheritors.    See Also:  Ways to Reduce Taxes on...

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