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Credit mix: What is it and how it affects your score

Credit diversity makes up 10% of your FICO score. So, what is it?

Credit mix refers to the different types of credit accounts that appear on your credit report.

The two most utilized credit scoring methods — FICO and VantageScore — factor your ability to manage different types of credit and loans into your credit score.

So, while it’s important to consider your credit mix, keep in mind that a diverse credit mix may do more harm than good if you don’t manage your debt well.

What is credit mix?

Credit mix is the combination of the revolving and installment credit that appears on your credit report.

Revolving credit doesn’t have a specific balance and its due date varies depending on how often you access this type of credit. The most common form of revolving credit is a credit card.

Installment credit is a long-term debt agreement like a loan. This type of credit includes mortgages, student loans and auto loans, and it’s sometimes referred to as “non-revolving credit”.

Lenders like to see that you can manage both revolving credit and installment loan accounts.

What’s a good credit mix?

A good credit mix is credit diversity, or a blend of revolving and installment credit.

Maintaining a mix of different types of credit accounts makes up for 10% of your FICO score. VantageScore doesn’t disclose the exact percentage of your credit score that your credit mix composes, but states that your credit mix is an important factor(1). It’s predicted that credit mix and credit age may hold a combined weight of 20% of your VantageScore(2).

Types of credit mix

The following are the types of revolving and installment credit that are included in your credit mix, according to Experian(3):

Revolving credit:

Installment credit:

  • Student loans
  • Mortgages
  • Auto loans
  • Personal loans

Payday loans and title loans aren’t included as part of your credit mix. Keep in mind that you don’t just want to show that you have a good credit mix but that you can meet your monthly payment obligations for the debt you’ve taken on.

How to improve your credit mix

To improve your credit mix, you can open a credit card or take out a secured personal loan. Again, be sure that you can make the required monthly payments for both.

You can also pay off your installment loans at the agreed upon steady rate as opposed to paying off a loan in full if you have the money to do so.

When you pay off an installment loan, it reduces your credit mix, which can technically hurt your credit score. In this type of scenario, you’ll have to take into account how important the state of your credit mix is compared to the rate of interest you’re paying on your installment loan.

Bottom line

Credit mix is an important component of your credit score. It’s important to build credit by successfully managing both revolving and installment credit accounts.

And remember that while establishing a good credit mix on your credit report is important, it’s essential that you’re able to make the agreed upon payments on your debt each month if you want to keep your credit score in good standing.

Written by

Frank Corva

Frank Corva is business-to-business (B2B) correspondent for Bitcoin Magazine and formerly the cryptocurrency writer and analyst for digital assets at Finder. Frank has turned his hobby of studying and writing about crypto into a career with a mission of educating the world about this burgeoning sector of finance. He worked in Ghana and Venezuela before earning a degree in applied linguistics at Teachers College, Columbia University. He also taught writing and entertainment business courses in Japan and worked with UNICEF in Namibia before returning to the US to teach at universities in New York City. Earlier in his career, he spent years working as a publicist and graphic designer for record labels like Warner Music Group and Triple Crown Records. During that time, he was also a music journalist whose writing and photography was in published in Alternative Press, Spin and other outlets. See full profile

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