What Is a Credit Account, and How Does It Work?

Most people need to access credit at least once in their lives. And even if you don’t need credit, having a good credit score can be helpful when applying for jobs and buying insurance.

To build your credit, you must be able to show lenders that you can successfully manage at least one credit account. What is a credit account? And what steps can you take to build your credit? Let’s take a closer look.

What is a credit account? What are credit accounts used for?

A credit account is an account or financial arrangement that allows you to borrow money or make purchases and pay them back over time. These are some common examples:

• Loans
• Credit cards
• Home equity lines of credit (HELOCs)

Most credit accounts also have the following in common:

• Lenders review your credit report before approving you and determining your interest rate
• You pay back the credit over time
• You pay interest on the funds borrowed
• Borrowers report your payments to credit bureaus

Many lenders will report to all three credit bureaus (Equifax, Experian, and TransUnion), but some may only report to one or two. If you pay back your credit on time and in full, you can build a positive credit history. 

How credit accounts work

What is a credit account? Credit accounts fall into two broad categories:

• Revolving Credit: Allows you to repeatedly borrow up to a pre-set limit
• Installment Credit: Requires you to repay money in regular installments

Credit cards are one of the most common kinds of revolving credit. When you apply for revolving credit, the lender looks at your income and creditworthiness to determine your interest rate and credit limit.

For example, if you have a $700 credit line, you can repeatedly borrow and pay back up to that amount. Your total outstanding balance just can’t exceed $700.

Installment credit accounts (like loans) work differently. After you apply and are approved, you receive your funds. If you’re taking out a mortgage or a car loan, the money goes right to whoever is selling the house or the car.

From there, you repay the money in installments over time. You can’t reuse a loan like you can a credit card.

Best types of credit accounts for building credit in 2026

As you may have already found out, accessing credit when you have limited or no credit history can be very difficult. If you’re hoping to build credit in 2026, these types of accounts might help give you a head start:

Secured credit cards

Secured credit cards reduce the lender’s risk. If you’re approved for a card, you make a cash deposit that becomes your credit line. That way, if you fail to repay your debt, the lender will just use your deposit to cover the costs.

Once you’ve built enough of a credit history, your lender will likely upgrade you to a regular credit card and refund your deposit.

Credit-builder apps

Credit-builder apps tend to have more flexible application requirements, so if you’ve had trouble securing a credit card, it might be worth trying a credit-builder app.

Each of these apps works a little differently, but usually, you gain access to a small loan or credit line. The app then reports your payments to credit bureaus, helping you build up your credit.

Kikoff is one of these apps. We don’t check your credit when you apply, and when you’re approved, you get a credit line you can use to buy items from our in-app store. You make interest-free repayments, and we report them to all three credit bureaus.

Student credit cards

Student credit cards are an alternative to secured credit cards. They don’t require a deposit, but they’re designed for people with limited credit history and tend to have low limits. If you successfully manage your student credit card, the card issuer may increase your credit limit, upgrade you to a card with better benefits, or both.

Credit-builder loans

Credit cards and credit-builder apps aren’t the only ways to improve your credit. Many in-person and online lenders offer credit builder loans. These loans work similarly to secured credit cards. 

When you apply and are approved, the lender puts the loan amount into a secure account instead of releasing it directly to you. You then make installment payments over a specific time period, and the lender reports these timely payments to credit bureaus. Once you’ve made all the required payments, the loan amount is given to you. 

Conclusion

We know that diving into the world of credit for the first time or trying to improve your score can be daunting. That’s why we launched Kikoff to make building credit simple and easy.

Ready to start building with us? Create your account today!