There are three main types of credit: revolving credit, installment credit and open credit. Each works differently, but they all involve borrowing money or using a service now and paying later.
Knowing the difference can help you understand your credit report, manage debt and choose the right borrowing option.
Your credit mix -- the different kinds of credit accounts you manage -- can also affect your FICO Score, though it matters less than payment history and amounts owed. FICO says credit mix makes up 10% of your score, while payment history makes up 35% and amounts owed makes up 30%.
Key Takeaways
Revolving credit lets you borrow up to a limit, repay the balance and borrow again. Credit cards, personal lines of credit and home equity lines of credit are common examples.
Installment credit gives you a set amount upfront and a fixed repayment schedule. Auto loans, student loans, mortgages and personal loans are common examples.
Open credit usually requires you to pay the balance in full each billing cycle. Utility accounts, charge cards and some service accounts may fall into this category.
Summary generated by AI, verified by MoneyLion editors
What Are the Main Types of Credit?
The main types of credit are revolving credit, installment credit and open credit. The difference comes down to how you borrow and how you repay.
Type of Credit | How It Works | Common Examples |
Revolving credit | You borrow up to a limit, repay and borrow again | Credit cards, lines of credit, HELOCs |
Installment credit | You borrow a fixed amount and repay it over time | Auto loans, mortgages, student loans, personal loans |
Open credit | You use the account and usually pay in full each billing cycle | Utility bills, charge cards, some service accounts |
Each type can show up differently on your credit report, depending on whether the lender or service provider reports the account to the credit bureaus.
Look at your credit report as a statement with information about your credit activity and current credit situation, including loan payment history and the status of your credit accounts.
Revolving Credit
Revolving credit lets you borrow repeatedly up to a set credit limit. As you repay what you borrow, that available credit usually opens back up.
Credit cards are the most common example. If you have a $2,000 credit limit and spend $500, you usually have $1,500 left to use. If you pay back the $500, your available credit goes back up.
Common examples of revolving credit include:
Retail store cards
Personal lines of credit
Home equity lines of credit
Revolving credit can be flexible, but it can also become expensive if you carry a balance. Interest charges can grow quickly, especially on high-APR credit cards.
How Revolving Credit Can Affect Your Credit
Revolving credit can affect your credit score through payment history and credit utilization. Credit utilization is the share of your available revolving credit you’re using. For example:
Credit Limit | Balance | Utilization |
$1,000 | $100 | 10% |
$1,000 | $300 | 30% |
$1,000 | $800 | 80% |
Lower utilization helps your credit profile, while high balances hurt it. FICO includes amounts owed as 30% of your score, making balances an important factor.
Installment Credit
Installment credit gives you a fixed amount of money upfront. You then repay it in scheduled payments over a set term.
Installment credit is often used for larger purchases or planned expenses. The payment is usually the same each month if the loan has a fixed interest rate. Common examples of installment credit include:
Auto loans
Student loans
Personal loans
Some buy now, pay later loans
Simply put, installment credit involves a lump sum paid back in fixed payments over time, while revolving credit lets you borrow, repay and borrow again.
How Installment Credit Can Affect Your Credit
Installment credit helps your credit if the lender reports the account and you pay on time. It can also hurt your credit if you miss payments, default or take on more debt than you can afford.
Installment loans may also affect your credit mix. But don’t open a loan just to diversify your credit. Credit mix is only one factor and makes up a much smaller share of your score than payment history or amounts owed.
Open Credit
Open credit is a type of account where you can use credit or services during a billing period and typically must pay the full balance when the bill is due. Open credit may include:
Utility accounts
Cellphone accounts
Charge cards
Certain business accounts
Some service provider accounts
Open credit can look similar to revolving credit because you may use the account repeatedly. The main difference is that open credit usually doesn't let you carry a balance over time the way a credit card does.
Not all open credit accounts appear on your credit report. For example, utility or cellphone payments may not show up unless the provider reports them, you use a reporting service or the account goes to collections.
Installment Credit vs. Revolving Credit vs. Open Credit
Here’s a quick comparison of the three major credit types.
Feature | Revolving Credit | Installment Credit | Open Credit |
Borrowing structure | Borrow up to a limit | Borrow one fixed amount | Use service or account during billing cycle |
Repayment structure | Minimum payment or full balance | Fixed scheduled payments | Usually due in full |
Can you borrow again? | Yes, as you repay | Usually no, unless you open a new loan | Usually yes, if account stays active |
Common examples | Credit cards, lines of credit | Auto loans, mortgages, personal loans | Utilities, charge cards |
Main risk | Carrying high balances | Long-term payment obligation | Missed full-balance payments |
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How Credit Mix Affects Your Credit Score
Credit mix means the different types of credit accounts in your credit profile. A mix of installment and revolving accounts may help show lenders you can manage different forms of debt. That said, credit mix shouldn't be the main reason you borrow. FICO notes that a strong mix of installment and revolving loans won’t make up for bad payment history, which is the largest FICO scoring factor.
A healthy credit profile usually comes from:
Paying bills on time
Keeping credit card balances low
Avoiding unnecessary applications
Managing debt responsibly
Checking credit reports for errors
If you only have one type of credit, that doesn't automatically mean you have bad credit. You can build a strong score with responsible habits over time.
Which Type of Credit Is Best?
No type of credit is automatically best. The right option depends on your goal, budget and repayment plan.
Goal | Type of Credit That May Fit | Why |
Everyday purchases paid off monthly | Revolving credit | Flexible spending and reusable credit limit |
Buying a car | Installment credit | Fixed loan amount and scheduled payments |
Buying a home | Installment credit | Long-term repayment structure |
Paying utility bills | Open credit | Service used first, bill paid later |
Emergency flexibility | Revolving credit or line of credit | Can be reused if managed carefully |
Debt consolidation | Installment credit | Fixed payoff schedule may simplify repayment |
The best credit type is one you can afford, understand and repay on time.
How To Manage Different Types of Credit
Different types of credit work differently, but the core habits are similar.
Pay on Time
Payment history is the largest FICO scoring factor. One missed payment can hurt your credit and may lead to late fees, penalty APRs or collection activity.
Keep Revolving Balances Low
Credit cards and other revolving accounts affects utilization. Keeping balances low compared with limits can help your credit profile.
Understand the Total Cost
Before borrowing, compare the APR, fees, repayment term and total amount you’ll repay. A lower monthly payment can cost more over time if the term is longer.
Avoid Borrowing Just for Credit Mix
Credit mix can help, but it’s not worth taking on debt you don’t need. Focus first on paying on time and keeping balances manageable.
Check Your Credit Reports
Review your credit reports for unfamiliar accounts, incorrect balances or inaccurate late payments. Your reports show the account information used to calculate many credit scores.
The Bottom Line
The three main types of credit are revolving credit, installment credit and open credit. Revolving credit lets you borrow again as you repay. Installment credit gives you a set amount and a fixed repayment schedule. Open credit usually requires full payment each billing cycle.
Having different types of credit can help your credit mix, but it’s not the most important part of your score. Paying on time, keeping balances low and borrowing only what you can afford matter more.
Key Terms
Revolving credit: A credit account that lets you borrow up to a set limit, repay what you owe and borrow again as available credit opens back up.
Installment credit: A loan that gives you a fixed amount upfront and requires regular payments over a set repayment term.
Open-end credit: Credit offered under a plan built for repeated use, where available credit can replenish as you repay what you borrowed.
Credit utilization: The percentage of your available revolving credit you’re using. Lower utilization can help your credit profile.
Credit report:A statement that shows your credit activity and current credit situation, including payment history and account status.
Sources:
Equifax: What Is a Credit Utilization Ratio?
CFPB: What is a credit report?
Experian: What Is Revolving Credit?
Summary generated by AI, verified by MoneyLion editors
FAQ
What are the main types of credit? The main types of credit are revolving credit, installment credit and open credit. Revolving credit can be used repeatedly up to a limit, installment credit is repaid over a set term and open credit usually requires full payment each billing cycle.
What is revolving credit? Revolving credit lets you borrow up to a credit limit, repay what you owe and borrow again. Credit cards, retail cards and lines of credit are common examples.
What is installment credit? Installment credit lets you borrow a fixed amount and repay it through scheduled payments. Auto loans, mortgages, student loans and personal loans are common examples.
What is open credit? Open credit usually lets you use a service or account during a billing period and pay the full balance when the bill is due. Utility accounts, charge cards and some service accounts may work this way.
Which types of credit help your credit score? Revolving and installment accounts can help your credit score if they are reported to the credit bureaus and paid on time. Credit mix can help, but it matters less than payment history and amounts owed.
Do you need all types of credit to have good credit? No. You don’t need every type of credit to have good credit. A mix can help, but responsible habits like on-time payments and low balances matter more.
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