Open trades on your credit report refer to types of accounts you carry. These include loan agreements you’ve entered into and credit accounts extended to you by banks and financial institutions. Creditors and future lenders review your open trades to get an idea of your payment habits, how you use your accounts and how you manage your available credit. When you review your credit report, you might notice you have several different types of open trade accounts.
A revolving trade account is an account that provides you with a credit limit you’re allowed to use and pay back over time. When you make payments towards the credit you’ve used, your credit limit is replenished and you have new available credit. The most common revolving account is a credit card, but some loans also offer revolving terms, such as home equity lines of credit and overdraft reserve accounts. On your credit report, you’ll see your credit limit, current balance and minimum monthly payment listed for each revolving account.
Installment trade accounts involve agreements you make to pay an account over time. These accounts show your original and current balance on your credit report, as well as the amount you’re required to pay each month. Unless an installment account is new, your current balance should be less than the original balance as long as you’re making payments on time. Examples of common installment accounts include auto loans, mortgages and personal loans from banks or finance companies.
Companies that issue charge accounts usually assign a specific charge limit to your account, but these accounts differ from a revolving credit account. Charge accounts allow you to use your credit limit to make purchases, but you’re typically required to pay the balance in full by a certain date instead of over an indefinite period. Some charge accounts charge interest immediately on your purchases, while other charge accounts offer zero interest if your pay your balance before the due date. Similar to a revolving account, your credit report shows the credit limit and balance for the charge account, but it might not show a minimum monthly payment amount, as this type of payment isn't a normal charge account feature.
Open collection accounts are the least attractive trade account on a credit report. Accounts usually go to collection when the company you originally owe has difficulty collecting from you. Companies send accounts to collection agencies that try more aggressively to get payment. Open collections on your report alert future creditors and lenders that other companies have had problems collecting from you, which may indicate there is a risk in extending new trade lines in your name. Your credit report lists an open collection as long as there is a balance for the account. If you pay the account in full or agree to a settlement of the account, the collection account still shows on your report, but it should show as closed and paid or settled.
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