{"id":358769,"date":"2022-11-02T12:59:12","date_gmt":"2022-11-02T18:59:12","guid":{"rendered":"https:\/\/www.creditrepair.com\/blog\/?p=358769"},"modified":"2022-11-02T13:02:38","modified_gmt":"2022-11-02T19:02:38","slug":"types-of-credit","status":"publish","type":"post","link":"https:\/\/www.creditrepair.com\/blog\/education\/types-of-credit\/","title":{"rendered":"Types of credit: What they are and how they affect your score"},"content":{"rendered":"\n
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Disclosure regarding our editorial content standards<\/a>.<\/p>\n\n\n\n

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There are three main types of credit: installment credit, revolving credit and open credit. Each can affect your score positively or negatively depending on your credit mix, credit utilization and on-time payments.<\/p>\n<\/div>\n\n\n\n

You probably know what credit is<\/a>, and how to read a credit report or credit score ranges<\/a>. But did you know that there are different types of credit that can affect your score? Each credit type has its own payment expectation, interest rates and other predetermined factors that regulate how it is used and by whom.<\/p>\n\n\n\n

With almost 10 years of experience, CreditRepair.com<\/a> knows how important it is for our more than 950,000 customers<\/a> to receive guidance on credit mixing, utilization and credit repairs. We know that when you\u2019re establishing your credit or trying to reach a good credit score<\/a>, it\u2019s not enough to simply check your credit score<\/a> or report \u2014 you need to know the different types of credit and what they do, too!<\/p>\n\n\n\n

<\/a>What are the three types of credit?<\/h2>\n\n\n\n

The three types of credit are installment credit, revolving credit and open credit. Although all credit lets you borrow money and pay it back later, each type of credit works slightly differently.<\/p>\n\n\n\n

<\/a>1.    <\/strong>Installment credit<\/strong><\/h3>\n\n\n\n

Mortgages, auto loans, student loans and personal loans are all examples of installment credit. This type of credit usually means you will pay back the total amount in installments and provides up-front details concerning interest rates, length of payment and monthly fees so you\u2019re not surprised about how much you owe each billing period.<\/p>\n\n\n\n

<\/a>2.    Revolving credit<\/strong><\/h3>\n\n\n\n

Thinking about applying for a new secured credit card<\/a> or line of credit? If so, you\u2019re considering using revolving credit. This credit type enables people to borrow money on demand up to a predetermined limit and then accrue interest on any money that isn\u2019t paid back each month.<\/p>\n\n\n\n

<\/a>3.    Open credit<\/strong><\/h3>\n\n\n\n

If you\u2019re looking to borrow only the money you need to pay particular bills, consider using open credit. You don\u2019t need a fixed monthly amount in order to borrow money with this type of credit.<\/p>\n\n\n\n

For example, open credit is great for some cell phone plans and utility bills, like electricity bills, because they only charge you for what you actually use. Plus, open credit also includes unsecured credit cards<\/a> and some credit lines, so you have a variety of credit options available.<\/p>\n\n\n\n

 <\/td>Installment credit<\/strong><\/td>Revolving credit<\/strong><\/td>Open credit<\/strong><\/td><\/tr>
Are there credit limits?<\/strong><\/td>Yes<\/td>Yes<\/td>Yes<\/td><\/tr>
Is there a fixed monthly rate?<\/strong><\/td>Yes<\/td>No<\/td>No<\/td><\/tr>
Are there interest fees?<\/strong><\/td>Yes<\/td>Yes<\/td>Yes<\/td><\/tr>
Is there a fixed repayment term?<\/strong><\/td>Yes<\/td>No<\/td>No<\/td><\/tr>
Examples<\/strong><\/td>Mortgages, auto loans and student loans<\/td>Secured credit cards and lines of credit<\/td>Unsecured credit cards and lines of credit<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

<\/a>How do the different types of credit affect your score?<\/h2>\n\n\n\n

Each type of credit can affect your score in positive or negative ways, even when you\u2019re not consciously thinking about maintaining a good credit score<\/a>.<\/p>\n\n\n\n

We get it\u2014remembering to pay your bills, reimburse a loan and stay on top of your credit card statements is enough as it is. However, we also know that it\u2019s important to consider how each type of credit can impact your credit score before applying for them.<\/p>\n\n\n\n