If building a good credit record is important to you, you need to know that the credit reporting agencies do look at the different types of credit through different lenses. They actually consider some credit accounts as being of less desirable and will lower your credit score if you rely heavily on them. Specifically, some installment type accounts or loans may be viewed in a negative light. These are accounts established by appliance or home goods retailers, as well as some consumer credit companies that offer unsecured personal loans. Sometimes these accounts may be unavoidable, but your best move is to pay them off before all other types of credit.
Another form of “bad” debt is all of the credit accounts you hold that have balances ratios in excess of 30% (the ratio of the outstanding debt balance to the available credit limit). For each account with a higher ratio, your score can be reduced. It is actually good to have open and active accounts, but they can turn bad if you let their balance get away from you. Make sure to spread your debt balances around; transferring debt from one credit card account to another if you have to.
The information provided is not intended to be legal, tax, or financial advice or recommendations for any specific individual, business, or circumstance. TowneBank cannot guarantee that it is accurate, up to date, or appropriate for your situation. Financial calculators are provided for illustrative purposes only. You are encouraged to consult with a qualified attorney or financial advisor to understand how the law applies to your particular circumstances or for financial information specific to your personal or business situation.