Credit Default Swap (CDS): How This Credit Derivative Works and Why It Matters
Warren Team
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Key terms
- Credit ScoreA numerical representation (typically 300-850) of your creditworthiness based on your credit history. Higher scores indicate lower credit risk and can lead to better loan terms.
- HELOC (Home Equity Line of Credit)A revolving credit line secured by your home equity. You can borrow, repay, and borrow again up to your credit limit, typically with variable interest rates.
- Tax CreditA dollar-for-dollar reduction in taxes owed. More valuable than deductions, which only reduce taxable income. Examples include Child Tax Credit and Earned Income Tax Credit.
- Available CreditThe amount you can still charge on a credit card, calculated as credit limit minus current balance and pending transactions. Using all available credit hurts credit utilization ratio.
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