Types of Credit
Set $$$ borrowed
Set time period to pay off
Set monthly payments
Paid off = account now closed
Set $$$ credit limit
Charge purchases up to limit
Pay down balance monthly
Repeat = account open indefinitely
Active vs Inactive
An active installment account has a balance and required monthly payment.
If paid in full, or deferred, or defaulted, the installment account is now inactive.
An active revolving account has at least one payment made in the last six months.
If no payments are made in 6 months, the revolving account is now inactive.
Test your knowledge: which are installment accounts?
A. Student loan
B. Checking account
C. Auto loan
D. Savings account
Student loan and auto loan
Test your knowledge: which are revolving accounts?
A. Personal line of credit
B. Rent-to-own products
C. Prepaid card
D. Credit card
Personal line of credit and credit card
How much credit history is enough?
> No accounts or activity in past 7-10 years
> No recent use of credit
> No collections or public records
> Credit history is too young, less than 3 years
> Or less than 3 accounts
> Or no/few collections and public records