Revolving credit accounts (credit cards) are the most “active” accounts on your credit report. They have aspects to them that no other credit account has. The main difference between a revolving account (credit card) and an installment account (auto loan) is the “utilization” of the credit line.
Installment loans are fixed payment loans that have the principle balance reduced on a scheduled payback through the term of the loan. On an installment account, it’s not possible to increase the balance by using the credit line. This is only possible on a revolving credit line.
Revolving credit accounts impact your credit scores on multiple fronts. They include credit utilization (balance / limit as a percentage), payment history, age, and credit mix. Installment accounts only have payment history, age, and credit mix that are reported to the credit bureaus to effect your rating.
It’s important to review how your revolving credit accounts are reported to the credit bureaus. Review the “balance” and also the “limit” reported. If your balance is higher that the reported limit on the account, this can significantly lower your credit scores. Pay the balance down below the limit, or best below 10% of the credit line to improve your scores.
Keep an eye on your credit limits on your credit cards. Banks can increase or decrease your credit limits based upon your performance. If your bank feels you are a credit risk (missing payments, maxed out credit lines, etc..) they can lower your credit limits on your credit cards which can further lower your credit scores. Credit card banks often check into your credit with a “soft pull” or a “account review inquiry” that doesn’t impact your credit scores, it just allows them to see all of your other credit accounts’ performance. If they see risky credit, they may lower your credit limit or even close your account.
And lastly, monitor your credit monthly. There are many credit monitoring sites and most credit card banks offer free credit monitoring. Check yours to setup your monitoring alerts.
For a personalized credit check up, feel free to contact me direct for a credit report consultation and review.
President and Certified Credit Expert