There are other types and forms of credit that play a more minor role in your credit rating. This includes service credit, and whether the credit obtained is secured or unsecured.

Service credit is another form of credit related to the purchase of utilities, internet, landline and cellular phone services, or any other non-fixed item that is used regularly and in which monthly payments for access is made.

Service credit may or may not have an effect on your credit report or credit rating, depending on how service-related creditors report your payment history for purchase of services. Additionally, depending on the type of service credit you wish to obtain, your credit report can be reviewed, which can effect whether or not a deposit may be required to obtain services. However, unlike with revolving or installment credit, and in most services other than cellular phone service, this review may not have an effect on your credit report or credit score. Finally, your payment history with a service provider does not have a direct effect on your creditworthiness, as it is generally not included on a credit report (see “How Credit is Tracked”).

However, failing to pay service credit payments can lead to a creditor referring your account to a collection agency, at which point it may show up on your credit report as a delinquent account, negatively impacting your credit report and credit score.

Another related factor is whether or not the credit is secured or unsecured. Both installment and revolving credit accounts can come in both of these forms.

Basically, secured credit is backed by the material item or property being purchased, or through a deposit. This involves placing a lien or documentation of ownership by the creditor, or a monetary deposit in the amount of the credit obtained. Secured credit includes car loans, various forms of home or equity loans, financed home furnishings and electronics, or other types of secured loans. Should you default on a secured loan or line of credit, the creditor has the right to repossess the property securing the loan such as a vehicle, furniture or equipment, foreclose on the property, or seize the monetary deposit. All of these have negative effects on your credit report and credit score.

With that in mind, unsecured credit involves obtaining credit without deposit or lien. Credit cards, lines of credit, store cards, or personal loans are forms of unsecured credit. Should you default on an unsecured credit account, the creditor can either contract a collection company or sell your account to a collection company, which might have an effect on your creditworthiness.

However, when payment or credit history is reported and credit scores are calculated, it matters if the credit account is secured especially if it is an installment loan. Complex systems of reporting and measuring personal credit has been developed, which are determinants in the types and forms of credit you obtain. Just how credit is tracked will be discussed in detail in the next article.