There are three types of credit that you’ll interact with most often:
Revolving credit is a type of credit where you can borrow, pay off, and borrow again up to a predefined amount of money. At regular intervals (usually a month), you’ll need to pay back at least a minimum amount. If you don’t pay off what you borrowed completely by that time, the unpaid amount will carry over to the next billing cycle and begin accruing interest. The most common examples of revolving credit are credit cards, HELOCs, and other lines of credit.
Installment credit is a type of credit where you borrow an amount of money all at once and pay it back in predetermined chunks or installments. These regular payments could last for only a few months or multiple years. Almost all loans are examples of installment credit, so that would include car loans, mortgages, and student loans.
The final type of credit, and one that you may not even think of as credit, is open credit. This is when you use something and then pay for it afterward in regular intervals. The most common examples of open credit are bills, like for your cell phone or utilities. You use the service on credit and then pay for what you used on your next bill. These types of bills don’t usually charge interest but will add fees if the amount isn’t paid on time or in full.