What is Revolving Credit?

Find out what revolving credit means, and why you should be concerned with it.

If you’ve ever been turned down on a credit application, chances are it was your revolving credit that got you. Simply put, revolving credit doesn’t have a fixed number of payments, like credit cards.


Revolving credit gives you the chance to withdraw funds from a set amount. You draw the money and the amount decreases, pay the balance off and it increases. Your payment is based on the amount you owe. There is usually a fee associated with this type of credit. You also have to pay interest on this line of credit, which is what gets most people in trouble. Most revolving credit has adjustable interest, so market changes affect your bottom line.

Some examples of revolving credit are loans from a bank or credit union. In recent years, payday loan companies have started reporting to credit bureaus and they are listed under revolving credit. Even your home equity loan qualifies as revolving credit.

Good revolving credit results in you getting that letter in the mail, letting you know your credit card limit was just increased. It also makes other lenders more comfortable with opening their wallets to you. Bad revolving credit not only gets you a rejected card, but it can have you kicked out of your house. If you default on a home equity loan, the bank owns your house.


It’s also the first thing creditors look at when they’re deciding whether you deserve that shiny new car you just test drove. Very few people can walk into a show room and walk out with that 2009 Spider, just by their name and their word. The rest of us have to cross our fingers and count back all the months we’ve been making our credit card payments on time. Not paying on time looks just as bad as not paying at all, especially on a credit report.


For additional information on credit cards or related topics please visit our library of credit card articles.