The world of consumer borrowing is built around four primary categories of credit, each distinguished by its repayment structure, flexibility, and typical use. Understanding these... moreThe world of consumer borrowing is built around four primary categories of credit, each distinguished by its repayment structure, flexibility, and typical use. Understanding these types is key to managing your credit mix, a factor that affects your credit score.
The Four Types of Credit
1. Revolving Credit
Revolving credit is a flexible line of credit with a set limit that renews as Accounting Services in Knoxville the balance. It offers the greatest flexibility, but requires disciplined management.Key Feature: You can borrow, repay, and reborrow repeatedly (it "revolves"). There is no fixed end date or set repayment schedule for the principal.Payment Structure: You are required to make a minimum monthly payment, but can choose to pay the entire balance or carry a balance over (which accrues interest).Examples: Credit Cards, Home Equity Lines of Credit (HELOCs), and personal lines of credit.Credit Impact: Maintaining a low credit utilization ratio (the amount you owe compared to your total limit)... less
