How Revolving Credit Impacts your Score
Updated: Feb 4, 2020
One of the many things our client’s come to us without is revolving credit accounts. Since most of our clients have had their credit cards charge off, they have no type of accounts with a line of credit under their names. This means they most likely have no credit cards, which believe it or not, does not help when it comes to boosting your scores.
The main thing we encourage these clients to do, is to add positive revolving accounts to their credit reports. These accounts, if kept under 30%, will positively impact their scores. Why? It is known and highly recommended that people should keep their overall utilization below 30% to show responsibility to creditors. Typically, low utilization rates help keep your score on the higher end – along with other facts of course. Nonetheless, credit card utilization, or revolving credit accounts, count for 30% of your overall score. This is a huge percentage of your overall score, which means that credit cards or revolving credit on your reports matter significantly.
Revolving credit gives borrowers a limit in their line of credit for spending. Think about your Capital One card, for example, which gave you a credit line of $10,000. These accounts have no fixed payment amounts and once paid off; the limits can be used all over again. The most known type of revolving credit are credit cards. Both secure and unsecured cards fall into the revolving credit category. It is important to remember that no matter the limit set on your card, you should never ever max it our or come close to it if you are trying to keep your scores relatively high. When our clients cannot qualify for a credit card due to their scores and negative reports, we always recommend that they seek a secured card or that they sign up to the programs we are affiliated with. Once signed up to our recommended programs, or once they have sought out a secured card of their choice, their accounts report to the credit bureaus, thus adding revolving credit to their reports. However, clients must pay on time, every month, in order to see a positive outcome from these accounts. Carrying high balances brings your scores down, as well as not paying them on time. Our end goal is to have positive revolving credit, which in turns results in positive, high-end scores.
Contact Credit Freedom Experts today if you have any further questions about your credit.