Types of Personal Credit

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Posted on 11/25/2016 by Thomas (TJ) Underwood of Realty 1 Strategic Advisors

Learn how you can use your understanding of the "5 personal credit factors" to more effectively manage your credit...


Did you know that there are 5 major factors that go into managing your credit and you can use the knowledge of those 5 factors to more effectively manage your credit and reach the goals that you desire? 


In this discussion we will look at how you can gain a better understanding of the types of personal credit available and how you can use that understanding to reach your goals in a more efficient manner. 


In later discussions we will specifically look at the other 4 credit factors so that you can gain a comprehensive and highly focused understanding and application of all of the credit factors so that you can truly reach the goals that you desire as you journey towards your life purpose and living your life on your terms.


Revolving Debt—generally your credit card payment and your gas card payment among others


How it operates:

Your debt revolves or comes around consistently at a pre-determined minimum payment based on your outstanding balance that is determined by your credit issuer and can be paid usually monthly either partially or in full. 

If paid in full on a monthly basis those payments would closely resemble open debt.

 Noted on your credit report with a Capital R


Open Debt—generally your cell phone bill and your internet bill among others but could also be an American Express card or other Credit Card that “requires” payoff on a monthly or other agreed upon basis


How it operates:

You will receive a bill from your creditor that requires you to pay off the bill in full to keep the service or credit line available. 

Failure to pay on a monthly or agreed upon basis will result in you receiving “notices to pay” which could have a negative impact on your credit and credit score.

 Noted on your credit report with a Capital O

Installment Debt—generally your mortgage payment and your car payment among others

How it operates:

You will receive a bill from your creditor that requires you to pay a stated amount in an agreed upon fashion for an agreed upon time period.   

Your car payment for $500 per month for 5 years serve as a good example of “installment debt.” 

Failure to pay on a monthly or agreed upon basis will result in you receiving “notices to pay” which could have a negative impact on your credit and credit score.

 Noted on your credit report with a Capital I




Now that you understand the different “types of personal debt” you should want to know the "relevance of the types" of personal debt to your lifeand your credit and financial future as it relates to building or establishing credit. 

If your goal is to build your credit from where you are now at to a better placeyou must evaluate at this time whether you have a "good mix" as far as the "types of personal credit" that you now have.


A credit card, a mortgage loan and a car loan is a better mix or type of debt than 3 credit cards when it comes to building and establishing your personal credit. 

That is not to say that you should go out and pursue unneeded types of credit just to build your credit score. 

The key is that your actions must line up with your goals!

Three or more credit cards may be right for you if you have no real desire to own a home nor do you have a desire to purchase a car now or in the near future. 


Your continued timely payments along with additional credit of the same type may build your credit to the level that you desire—it all depends on your goals and the time frame that you have in mind for achieving them.


You now have a better understanding of the "types of personal credit" available and you now know how you can use that knowledge to navigate the credit and credit score maize that seems to confuse all too many consumers.



Remember the 5 credit factors include:


Negative Information (you must do all that you can to keep it off of your credit report) or your Payment History—35% or

1st in importance of the credit factors


Utilization or how you Use Your Credit (do your best to keep your account balances low or at zero)—30% or

2nd in importance of the credit factors


Time Factor or how long you Keep Your Accounts Open (be sure to keep older accounts with a positive payment history open)—15% or

3rd in importance of the credit factors


Type of Credit or your Credit Mix—which we discussed in this article (you tell me all about "the types of credit"LOLno seriously) —10% or

4th in importance of the credit factors


Inquiries or how many creditors do a Hard Pull of your credit file (keep your hard inquiries to a minimum if you are trying to improve your credit in a timely manner)—also 10% or

The same level of importance as the "type of credit" mentioned above

All Together you have just learned 100% of the factors that affect your credit—generally speaking!



When it comes to your personal credit reports and personal credit scores, the type of debt you owe—also commonly referred to as your credit mix—is fourth in importance and carries the same weight as inquiries.

Likewise, opening a "different type" of account (even just one) will possibly help as far as the "type of credit" and at the same time shorten the "time length of your credit file" due to the "new credit" being calculated into the "time frame" of your credit file (however it will possibly reduce your utilization rate).

Your credit type could increase your score and your time length of credit (and new credit) could pull your score downand based on how FICO would calculate that event"type of credit" would possibly win the battle (more weight would be applied) and your overall credit score would possibly increase depending on how the algorithm calculated the event.


Also keep in mind that you control how the 5 factors listed above are managed for the most part!  Or another way of looking at it isyou are responsible for your future success!


Unforeseen or tragic life events can shape your credit and credit score—often in a negative way!  

However, you are now in position at this time to decide that you can use a proactive approach in the management of your credit and finances and reduce the likelihood of your credit or credit scores taking an unnecessary dive.


It’s easy to understand why you must keep negative marks off of your credit reports and keep your utilization of your credit at debt levels that are at least below 30%

If you are heavily in debt you are a poor credit risk compared to someone who has a low (less than 10%) to moderate (less than 30%) amount of debt and you should expect that a lender would not look at you as a favorable credit risk if your utilization is above 30%.


On the other hand, if you "know and understand the personal credit factors" and use that knowledge to your best advantage you can put yourself in a favorable credit position and improve your credit and credit score to a level that will put you among the best credit risks as it relates to personal credit.


Don’t just juggle around the "credit factors" and your knowledge about the "types of credit" in your head! 

Put the knowledge that you are now acquiring to use in the real world—NOW!


Remember that there are:


3 Major Credit Bureaus


Go to www.annualcreditreport.com to get your free copies of your credit report from the 3 credit bureaus once per year


1)      Transunion


2)      Equifax


3)      Experian




Or look at now as being the time (no excuse will do)that you will TEE off on managing and improving your credit in a more empowering manner.

Make it a point at this time to hit your mark as it relates to your credit goals and credit score.

Also at this time make it a point to use credit wisely throughout your lifetime!


Also realize that each of the major credit bureaus have their own credit scoring system!


3 Credit Scores—1 by each credit bureau




All the best…

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Learn how you can master the "5 Credit Factors" and "achieve more" throughout your lifetime...

Learn how you can establish your credit...

Learn why you must have a "mindset" for consistent success...

Go to "All About Credit" to learn even more about the factors that affect your credit report and credit scores...

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About This Article:


The above article was written by Thomas (TJ) UnderwoodThomas (TJ) Underwood is a former fee-only financial planner, a former top producing loan processor and is currently a licensed real estate broker in the state of Georgia. 

He is the writer behind The Real Estate & Finance 360 Degrees Series of Books that include The Wealth Increaser, Home Buyer 411 The Smart Guide to Buying Your Home, Home Seller 411 The Smart Guide to Selling Your Home, and  Managing & Improving Your Credit & Finances for this MILLENNIUM.

In addition he is also the writer who created The 3 Step Structured Approach to Managing Your Finances, and CREDIT & FINANCE IMPROVEMENT MADE EASY—NEW GUIDE that you can download right now "(at MIMIMAL cost $3.95)" to learn more about his writing style and how you can achieve "more" success in the current economy.

He is the creator of TheWealthIncreaser.com where he regularly blogs about helping consumers improve their credit, finance and real estate pursuits in an intelligent, consistent and proactive manner. 

He’s always looking for ways to make intelligent finance improvement happen for those who “sincerely desire” success in their future. He was the first financial planner to coin the phrase "financially alert mind"  and he consistently writes in a style that is designed to provide consumers the ability to take control of their lives and achieve great results.

You can contact him from a number of sources but the most direct way is to contact him through the contact us block that can be found at the bottom of this page.  You can also get highly relevant tips on "living your life more abundantly" and link to TheWealthIncreaser.com and possibly earn revenue by logging on to TheWealthIncreaser.com.

He is also an IRS registered tax planning professional with over 30 years of tax experience and can be reached at:




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