Revolving Credit
True or False: If you max out your credit cards regularly, carrying high balances, this can increase your credit score.
False
What is a type of credit where you must pay the full balance every month, like a charge card or utility bill?
Open Credit
What are common examples of installment credit?
Car loans, student loans, mortgages, and personal loans
This is a type of revolving credit account that when paid on time and kept under the credit limit can help improve your overall credit score.
Credit Card
Unlike a credit card, this card requires you to pay off everything you spend at the end of each month...
Charge Card
How does an installment loan differ from revolving credit?
Installment loans have fixed payments and a set end date, revolving credit allows one to continue barrowing up to a limit.
Having several open revolving credit accounts with low balances can improve this component of your credit score
Credit Utilization Ratio.
These monthly bills, like electricity or water, are common types of open credit that may not affect your credit score unless you pay late.
Utility Bills
What happens if you miss a payment on an installment loan?
It results in late fees, increased interest costs, and a negative impact on credit scores.
How does having multiple open revolving credit accounts affect your credit score? List both positive and negative effects.
It can lower your score if you have high balances or miss payments, but can improve it if you manage them well.
What happens if you don't pay an open credit account on time?
You could get late fees, and if it's reported, it might hurt your credit score.
What is a mortgage and how does it relate to installment credit
A mortgage is a long-term installment loan used to buy a home with monthly payments tat typically last 15-30 years.
According to the FICO Credit Scoring System, what percentage of your credit score depends on your payment history?
35%
Why don't credit accounts help your credit score as much as credit cards?
They don't always get reported to credit bureaus unless you miss a payment.
How can making extra payments on an installment loan save money?
Extra payments reduce the principal faster(interest on your interest), which lowers the total interest paid over time.