The Three Kinds of Credit

Installment Credit
Loans that require set payments, such as:

• Car loans
• Mortgage loans
• Student loans
• Boats, computers, TVs, etc.

Revolving Credit
You can use funds at anytime up to a specific dollar amount.  You can make monthly payments or pay the balance in full.  Any amounts left over after monthly payments are carried over with an interest charge.  Some examples are:

• Credit cards
• Check overdraft protection
• Home equity lines of credit
• Department store credit cards

Open Credit
Payment for services such as:

• Electricity
  
• Gas
  
• Water

Good Credit is Important
Good Credit means you can qualify for loans at lower rates.

be higher costing you more (see rate charts for more information).

What are Credit Bureaus?
Credit Bureaus are private companies.  Their business is collect information regarding your credit history.  From this information they develop a credit report.  The bureaus then assign a credit score which lenders use to determine your credit worthiness.  The three major credit bureaus are:

• Equifax
• Experian
• Transunion

How Credit Bureaus and Creditors work together.

• Creditors provide information about you to the Credit Bureaus.
• Bureaus compile information from multiple creditors about you into a credit report. They also assign a numerical value (credit score) to your report.
• Creditors and other businesses use this information to determine credit worthiness, potential employment, eligibility for insurance, etc.

How your credit score is calculated.

• Payment History           35%
• Unpaid debt                  30%
• Credit History               15%
• New Credit                   10%
• Credit Mix                    10%

 Payment History: 
 Have you paid your bills on time?
 Unpaid Debt
 The amount you owe should not exceed  30% of your available credit.
 Credit History
 How long have you had credit?
 New Credit
 Attempting to open too many new accounts  can bring your score down.
 Credit Mix
 Lenders like to see a mix of revolving and  installment types of credit.

 Good Credit Practices        

• Pay bills on time
• Exceed minimum payments
• Stay within your budget

 What is in your credit report?

• Name(s) including spouse, SSN, DOB, etc.
• Credit History-how you paid your bills and who you paid.
• Inquiries-people and companies checking on your credit worthiness.
• Public information-lawsuits, foreclosures, bankruptcies, judgments.