Credit Improvement: Know Your Debt
written by Credit-HQ ExpertMost of us know how much we are in debt, at least in a general way. But what really matters is how we see our debt. What matters is how that debt is viewed by credit card companies, banks, insurance agencies, apartment leasing agents and future employers who may take the time to review your debt to see if you are a person who has good control over your personal finances. And to understand what your debt looks like to other people, the place to look is your credit report.
| Subscriber | Discover Card | Citibank | American Express |
| Account Number | 30492383XXXX | 980039485 | 102745623098 |
| Account Type | Revolving | Installment | Open |
| Credit Limit (High Credit) |
$20,000 $6,862 |
$750,000 $37,000 |
N/A $2,000 |
| Minimum Monthly Payment (Terms) | $19 | $2,000 | N/A |
| Date Opened | April, 2002 | August, 1998 |
July, 2004 |
| Date of Status | March, 2005 | March, 2005 | March, 2005 |
| Last Payment Date | February, 2005 | February, 2005 | February, 2005 |
| Loan Type | Credit Card, Terms REV | Mortgage | Credit Card, Terms OPEN |
| Current Status | R1 | I1 | O1 |
Your credit report will break out your debt by account. You will find a line item for each account along with the current balance as of the statement you paid last month. So it is a little behind where you are right now. This approach to debt reporting is standard in credit reporting across the three major credit bureaus on all kinds of loans.
Types of Debt
There primarily three major types of debt that will be listed on your credit report. They are…
- Installment Debt
This is a loan that is set up to be paid down in a series of fixed payments. You are not expected to pay more than the standard payment although you can. You are familiar with installment loans if you financed a home or a car. If you pay a mortgage on your home, you pay the same basic amount every month for the entire life of the loan, in most cases 30 years.
The mortgage payment only changes because of insurance and property taxes. There is a schedule of depletion that you can get from your loan carrier, which shows how much of the payment you make comes off the debt. Generally, very little is paid on the actual debt at the beginning of an installment loan and toward the end of the term, you are paying a lot against the principle. On your credit report, look for an “I” in the Current Status Rating section of the report which will tell you if a debt is housed in an installment loan.
- Revolving Debt
Your credit card payment is revolving debt. This kind of debt is paid back in payments that are based on the amount of your current balance. So if you have a small debt on that credit card, your payment is low and as you add more debt, your payment goes up as well. Since each month the balance and the payment might change, that means the debt “revolves” or changes routinely. A revolving debt will show up as an “R” on the credit report in the Current Status section.
- Open Debt
Some bills you get and you have to pay them off entirely. You do not carry a balance. This is called an open debt. If your cell phone plan is based on usage, then the bill you get is an open debt. It might be different each month but you are expected to pay it in full. American express commonly works with open debt rather than revolving credit.
| Subscriber | Discover Card | Citibank | American Express |
| Account Number | 30492383XXXX | 980039485 | 102745623098 |
| Account Type | Revolving | Installment | Open |
| Credit Limit (High Credit) |
$20,000 $6,862 |
$750,000 $37,000 |
N/A $2,000 |
| Minimum Monthly Payment (Terms) | $19 | $2,000 | N/A |
| Date Opened | April, 2002 | August, 1998 |
July, 2004 |
| Date of Status | March, 2005 | March, 2005 | March, 2005 |
| Last Payment Date | February, 2005 | February, 2005 | February, 2005 |
| Loan Type | Credit Card, Terms REV | Mortgage | Credit Card, Terms OPEN |
| Current Status | R1 | I1 | O1 |
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