At times it seems like the more you learn about credit score and credit report aspects, the more they become confusing. As soon as you gasp something about one factor, another issues comes to your attention. There are many aspects which affect the credit history and score, and you need to keep on discovering the nitty gritty in order to be able to keep your credit report clean and improve your score.
The revolving balances are those, which have a portion of credit that goes unpaid at end of the billing cycle. Credit cards are revolving accounts, which attract different payment at the end of each month, which depends on current balance. In revolving accounts, the account holders are not required to pay their balances in full at the end of the month, and they carry or roll over their balances.
The card holders have an option to revolve some or all of the credit balances to the next billing cycle. One baffling issue about credit score is that about 10 percent of that score is determined by the types of credit you use. It is important that consumers maintain a healthy combination of different types of credit on their credit reports so that they keep the score good.
Consumers can use both revolving and installment balances. Revolving credit cards such as those used by credit unions or banks including Visa and MasterCard credit cards or the ones issued by non-bank financial institutions such as the Example Four and Example Sixion can affect your score depending on how you manage the balances. If you want to improve your score with revolving cards, you should make sure that you make payment of the minimum balances every month or pay higher amounts than the minimum to reduce the debts and clear it fast.
Carrying a balance may not affect your score negatively if you are making the payment in time and above the minimum balances. However, the moment you start missing payments or not paying your balances, the interest rates can hike and stretch your finances. In addition, if you are owed too much on your accounts, whether revolving balances or installment credits, the more you are considered a risk to lenders, and you should try to pay your current debts and maintain the balances at low levels.
The amount of charge levied on revolving balances depends on the size of balances and the interest rates attached on those cards. Once the balances are paid off, the consumer no longer carries revolving debt. Credit card debts determine about 30 percent of your score while the length of credit history determines another 15 percent of the same credit score and 10 percent is determined by the types of credit you have used such as revolving and installment credit.
If you consolidate your credit cards, this may help you obtain lower interest rates but it does not reduce the amount you owe on those cards. The length of time you have been holding revolving accounts may be used to determine your score. The age of the oldest revolving account or the average age of all the revolving accounts should be high. People who do not often open new accounts and they have longer credit histories are considered less risk by lenders.
This article was written by Steven Moore, who has been covering consumer finance and the credit card markets since 2006. You can learn more and connect at his Google+ page.