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Credit weight

BT90138016
Contributor

Credit weight

I'm ust noticing something from reading up on types of credit and how it affects your score and everything. I'm noticing more and more that credit card or "Revolving Credit" usage weighs heavier on your scores than lets say a signature loan.....Am I right or am I wrong to assume this?

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2 REPLIES 2
CAPTOOL
Senior Contributor

Re: Credit weight

Yes, revolving credit utilization does have a larger impact on credit scores. An installment loan will have a small negative impact when it's new, but as it's paid down the impact diminishes and then becomes a positive. High revolving utilization has an immediate and more dramatic negative impact. But, Fico has no util memory. In other words, once the balances are paid down, the impact goes away.

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MarineVietVet
Moderator Emeritus

Re: Credit weight


@BT90138016 wrote:

I'm ust noticing something from reading up on types of credit and how it affects your score and everything. I'm noticing more and more that credit card or "Revolving Credit" usage weighs heavier on your scores than lets say a signature loan.....Am I right or am I wrong to assume this?


Revolving credit (30% of your total score), and how you manage it, is second only to payment history (35% of your score) in importance.

 

The reason it's so critical is that revolving credit is unsecured and the risk to lenders is therefore higher.

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