Effects Test

AAA

DEFINITION of 'Effects Test'

A method used in order to assess the discriminatory impact of credit policies. The statutory basis is the Equal Credit Opportunity Act which prohibits credit denials on the basis of marital status, national origin, age or whether applicants are receiving public assistance, as well as the Fair Housing Act.




INVESTOPEDIA EXPLAINS 'Effects Test'

The effects test is most frequently applied in evaluating the fairness credit scoring systems and alternative mortgages, such as graduated payment mortgages, where future income is considered.




RELATED TERMS
  1. Equal Credit Opportunity Act - ...

    A regulation created by the U.S. government that states that ...
  2. Credit Scoring

    A statistical analysis performed by lenders and financial institutions ...
  3. Price Discrimination

    A pricing strategy that charges customers different prices for ...
  4. Federal Trade Commission - FTC

    An independent federal agency whose main goals are to protect ...
  5. FICO Score

    A type of credit score that makes up a substantial portion of ...
  6. FHA Loan

    A mortgage issued by federally qualified lenders and insured ...
RELATED FAQS
  1. No results found.
Related Articles
  1. Credit & Loans

    What's On A Consumer Credit Report?

    A look at the various components and considerations that go into one's credit report and credit score.
  2. Credit & Loans

    Take Control Of Your Credit Cards

    The plastic in your wallet doesn't have to hurt your finances. Learn how to manage it responsibly.
  3. Credit & Loans

    The Importance Of Your Credit Rating

    A great starting point for learning what a credit score is, how it is calculated and why it is so important.
  4. Retirement

    Understanding Credit Card Interest

    Paying these rates can impact your disposable income and your investment returns.
  5. Personal Finance

    Looking To Clear Up Your Credit Report?

    If you look at your credit report you might see any number of various items that are harmful to your credit score, but you can learn how to remove them.
  6. Personal Finance

    How To Find A Job With Poor Credit?

    It's not legal for an employer to refuse to hire you for having bad credit, but he doesn't have to say that you weren't hired because of your bankruptcy.
  7. Credit & Loans

    5 Top Credit Karma Tools To Keep Your Credit High

    As if the free, no-strings credit checkup weren't enough, this site also gives you personalized feedback to make you a better money manager.
  8. Credit & Loans

    How Bad Is My Credit Score?

    You've seen the number, but what does it mean? Here's how to assess your credit score and get to a better place if needed.
  9. Personal Finance

    Understanding Credit

    Credit has three common meanings in the financial world.
  10. Credit & Loans

    Why Credit Karma Is Free & How It Makes Money

    Credit scores originally were built for lenders, but now Credit Karma makes the system work for consumers, too – and makes money at it.

You May Also Like

Hot Definitions
  1. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  2. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  3. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  4. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
  5. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
  6. Law Of Supply

    A microeconomic law stating that, all other factors being equal, as the price of a good or service increases, the quantity ...
Trading Center