Key takeaway: The three general types of credit accounts are revolving, installment and open-end accounts, and each one can affect your credit scores a little differently.
Credit accounts typically fall into three types: revolving, installment and open-end. While they can each affect credit score factors like credit mix and payment history, only revolving credit typically affects your credit utilization.
You have many credit scores, each of which is calculated using a credit scoring model that pulls information from your credit reports. Each credit scoring model calculates scores a little differently, but they all typically take the same general credit factors into consideration.
Revolving, installment and open-end credit accounts will affect those factors in different ways.
If you just opened a new account and want to check your credit scores, consider starting with your VantageScore 3.0 credit score, which you can get from Credit Karma for free. Credit Karma provides VantageScore 3.0 credit scores through TransUnion and Equifax, two of the three major credit bureaus.
If you want to know how revolving, installment and open-end credit accounts will affect your scores in the short and long term, take a look at our breakdown.
- What are the different types of credit?
- How does each type of credit affect credit scores?
- What’s next? Start simple and build from there.
- FAQs about types of credit
What are the different types of credit?
There are three main types of credit accounts: revolving, installment and open-end. Here are the basics of each:
| Types of credit accounts | Definitions | Common examples |
|---|---|---|
| Revolving | A line of credit that has a limit but no set end date; you can borrow, repay and borrow again. | Credit cards and HELOCs |
| Installment | A loan for a fixed amount that you pay back with regularly scheduled payments over a set period. | Personal loans and mortgages |
| Open-end | A credit account that generally must be paid in full each month and may not have a fixed limit. | Charge cards and utility accounts |
Revolving credit
Revolving credit is a line of credit you can borrow from up to a set credit limit. As you repay what you borrow, you can generally use that credit again. Monthly payments are required, and interest may be charged based on the account terms.
Examples of revolving credit accounts include:
Installment credit
Installment credit refers to a loan for a set amount of money with fixed, regularly scheduled payments over a set repayment term. Each payment typically includes principal and interest based on the loan terms, and the balance should be paid off by the end of the term.
This is another common type of credit and what most people mean when they talk about “loans” in general. The installment credit category includes a variety of loan types, such as:
- Personal loans
- Student loans
- Mortgages
- Auto loans
Open-end credit
Open-end credit, also called open credit, refers to accounts that allow repeated borrowing without a fixed end date. Some lenders distinguish open-end credit from revolving credit by using open-end to describe accounts that may need to be paid in full each billing cycle, such as certain charge cards.
Common examples of open-end credit accounts can include:
- Utility accounts
- Cellphone plans
- Charge cards
Service accounts, such as utility and cellphone accounts, don’t typically appear on your credit reports unless they become delinquent or are sent to collections.
How does each type of credit affect credit scores?
Credit scores are calculated by pulling information from your credit reports into unique credit scoring models. Here are the five main factors FICO and VantageScore credit scoring models typically consider, as well as how each type of credit can influence those factors:
Credit mix
This category is the one most influenced by your credit accounts because it directly measures the different types of credit accounts you have. Having a mix of credit types is generally good for your credit.
But a mix isn’t needed to build credit successfully — and it doesn’t even account for a large percentage of your credit scores. For FICO scores, the credit mix category typically accounts for just 10% of your overall credit scores.
VantageScore models include “credit mix” in their “depth of credit” category, so while the exact percentage for credit mix on its own is unknown, it’s still small in comparison to VantageScore’s more important factors.
Because it’s such a small factor in building credit, you shouldn’t open a new credit account just to improve your credit mix.
Payment history
Payment history is the single most important factor in your credit scores, reflecting whether you pay accounts on time.
Most traditional credit accounts — including revolving lines like credit cards and installment loans like auto or student loans — are reported to the credit bureaus monthly.
To protect your scores, the most crucial habit you can build is paying these bills on time, every time.
However, the impact of payment history can vary depending on the account type:
- Revolving and installment: These are almost always reported to the bureaus. Positive payments help build your score, while late payments can significantly damage it.
- Open-end and service accounts: Aside from charge cards, many open-end accounts (like utilities or cellphones) typically do not appear on your credit report as long as they are in good standing. This means that while paying your electricity bill on time won’t necessarily help your score, missing enough payments for the account to be sent to collections can cause your score to drop.
Credit utilization
Credit utilization refers to the amount of credit you’re using compared to your overall available credit limits. This factor typically measures your credit card balances against your credit card limits, though other revolving lines — like a HELOC — can also play a role.
FICO models include credit utilization in their “amounts owed” category.
If you don’t have a HELOC or another revolving line of credit, you can usually calculate your utilization ratio by looking at your credit cards.
To avoid hurting your scores, many experts recommend keeping your utilization ratio below 30%.
Length of credit history
Length of credit history measures the age of your oldest and newest accounts, as well as the average age of all of your credit accounts combined. If you’re tracking your VantageScore, you’ll see this grouped under their “depth of credit” category.
Open-end credit accounts, with the exception of charge cards, don’t typically affect length of credit history because they’re not usually added to your credit reports.
In general, the longer your credit history, the better, meaning the best way to influence this factor is to keep your accounts open and in good standing.
Recent credit
Recent credit, also called “new credit” in the case of FICO scores, refers to accounts you’ve recently applied for or opened. It tracks the number of hard inquiries you’ve gotten from potential lenders.
This category is typically influenced by newly opened credit accounts and hard inquiries tied to applications for credit. Utility or service companies may sometimes check your credit as part of the approval process, but those checks are often soft inquiries, which don’t affect your credit scores.
What’s next? Start simple and build from there
Having a mix of credit can help your credit scores, but only if each account is managed carefully. Staying on top of your payments, regardless of credit type, can help show lenders that you can handle various types of credit. But, if you don’t need to open a new type of credit account, it’s probably not worth the bump in scores.
If you’re at the beginning of your credit-building journey, consider focusing on one type of credit. Revolving credit, such as a credit card, can be a good place to start.
For example, you could open a secured card and start using it for small purchases that already fit your budget. Once you’re comfortable making on-time payments — and ideally paying the balance in full each month — you can look into other credit products.
As you build credit, it can also help to monitor your reports and scores regularly. Credit Karma provides free VantageScore 3.0 credit scores, along with free credit reports from TransUnion and Equifax.
By signing up with Credit Karma, you can get in the habit of checking your credit reports and scores as you build credit.
FAQs about types of credit accounts
Common examples of revolving credit accounts include credit cards, HELOCs and personal lines of credit. Installment credit accounts include loans such as personal loans, mortgages and auto loans. Open-end credit accounts include charge cards, cellphone plans and utilities.
Credit accounts are often grouped into three main types: revolving, installment and open-end. Some sources may describe service accounts, such as utility accounts, separately. But they’re often discussed as a form of open-end account.
Credit products designed for building credit are often easier to qualify for than accounts meant for people with established credit. Secured credit cards can be a good option for those just starting out. Credit-builder loans may also be worth considering. Some other credit products may be easier to get, but they can come with high costs or risky terms, so read the fine print before applying.