When evaluating a customer's application for a credit product, lenders will examine the applicant's credit history. Credit reports are available from three bureaus, each with information regarding payment history and a score based on the information contained in the report. Knowing which types of accounts are shown on a credit report can help consumers build a solid credit history and gain approval for additional credit products in the future.
Installment Loans
The majority of available credit accounts that a consumer can choose from are known as installment accounts. Installment accounts require that the consumer make a set monthly payment with an end date for the loan. Examples of installment loans include secured purchases that are secured by the item the loan is granted for, such as a mortgage loan or an auto loan. Installment accounts can also include unsecured loans such as a personal loan, which require only an application and a signature from the borrower in order to be granted. Loans for furniture, electronics and home furnishings can also be considered installment loans if there are set repayment terms. Installment loan lenders can report the amount of the loan, the payment amount and the payment history on the account.
Non-Installment Credit
Non-installment credit is considered a type of credit that allows a consumer to borrow funds on a credit account with the option to make irregular monthly payments with no specific amount. The most common form of non-installment credit is a credit card, which allows customers to make purchases up to the credit limit, with flexible repayment terms as the account balance decreases. Unlike installment loans, non-installment credit products allow the consumer to continue accessing funds until their limit is reached without providing a new credit application. Charge accounts for a specific retailer or a personal line of credit may also be considered types of non-installment credit. Similar to installment loans, lenders for non-installment credit products are able to report the account balance and payment history to the credit bureaus.
Collection Accounts
If a consumer defaults on loan payments to the point where the lender sells the debt to an outside company to collect, he will have collection accounts on his credit report. Collection accounts are a negative entry and will lower a consumer's credit score. Since the company is attempting to collect past due funds on the behalf of the original lender, it is allowed to place a notation on a customer's credit report. Often times collection accounts are sold between lenders, meaning that the consumer could have multiple collection accounts on his credit report for the same debt. If the consumer pays the collection agency in full, the notation is not removed from the report, it is simply updated as paid.
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