Are you interested in building your credit scores? You may be asking yourself if a loan or a credit card is better for you.
If you are trying to build your credit scores a credit card is best! You may be wondering why?
With an installment account, when you apply you will get inquiry which will impact your scores. The negative aspect to loans is that when you apply you are adding new debt to your report. This will usually be accounts like personal loans, auto loans, and student loans. Depending on the type and amount of the loan, in many cases consumers add thousands of dollars to their report. This impacts the scores as 30% of your credit score is based on the debt you owe.
With revolving accounts, yes you will also get an inquiry, but are you adding debt? Most likely not. With credit cards you are given a limit and can use minimal debt. Many consumers now aim to use their credit card and pay in full to avoid interest charges, and any impact to their credit score by avoiding carrying debt.
So the next time you consider opening up a line of credit or loan to help your scores, try to consider what revolving or credit card options are available for the best results.
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*The information in this article has been provided strictly for educational purposes.