What Is a Revolving Account on a Credit Report?

By Melvin Richardson

  • Overview

    Chances are, if you have a credit card or some type of department store charge account, then you have a revolving account. These are accounts that require you to pay a minimum payment each month along with the finance charges/interest that has accumulated from one billing cycle to the next. With a revolving account the terms are open or there is no exact fixed date for you to pay off your account. The entire balance, assuming you don't pay it off in full, revolves from one month to the next.
  • Identification

    A revolving account can easily be identified on your credit report based on the way your account pay history is rated. Your revolving account will be identified by an "R" to the far right of the account that is listed on the credit bureau. The "R" stands for revolving. Now some bureaus may not use this designation, and they will simply spell it out: "Revolving Account." After the "R," there will be a number from 1 to 9 that tells how early or late your payments are. The number "1" means you pay your account less than 30 days from the billing date or as agreed. Everyone should strive for this rating because it's the best that you can receive. The larger the number after the "R," the less favorable your credit rating is. An R-2 means you pay later than 30 days, but you are less than 60 days late.
  • Information

    The information included on your credit report about your revolving account will be the name of the creditor, the opening date, the opening balance, the high credit amount, credit limit, date last paid, the "R" designation and if you have any amount past due. How many times you have been late will also appear on your credit report. An installment account is different from a revolving account because they have a fixed date to be paid off. Examples of installment loans are automobile loans and mortgages. The terms for an automobile loan can be 36, 48, 60 or 72 months. You make a payment every single month. These accounts are identified on your credit report with the letter "I," which, as you may have guessed, stands for installment.

  • Calculations

    If you are trying to get out of debt by paying off your revolving accounts, then you may want to use a financial calculator to determine your payoff date. Otherwise, you won't have any idea. Your payments could go on for years and years unless you decide to start making payments over and above the minimum due.
  • Usage

    With a revolving line of credit you can continue to use these accounts over and over again unless you decide to close them out. The creditor can also close your account, but only if you become delinquent. This account can be reopened if you bring your account up to date. Once you pay off your balance you can immediately use it again without going through another credit check. Your revolving account is there for your use time and time again. If you pay off your automobile loan you cannot use that account again because it's an installment loan used specifically for that one purchase.
  • Limit

    As time goes on and you handle your revolving account responsibly, that creditor will eventually increase your credit limit, which allows you to purchase more merchandise.
  • Payments

    Your payments will normally be 1 or 2 percent of your balance, or $15, whichever is greater. You can call your customer service department to get the exact payment amount. Your payment calculation takes into effect your interest rate or annual percentage rate. As your balance decreases, so does your minimum payment.
  • Rate

    Historically the interest rate on revolving accounts can be somewhere in the area of 16 to 18 percent, which is very high. In some cases, your rate can be as high as 24 to 26 percent; it all depends on the creditor's terms and agreements.
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