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What is credit mix, and how does it affect your credit score?

Yahoo Personal Finance· Getty Images
Kat Tretina
Updated 4 min read

From your car insurance premiums to the rates you qualify for on a mortgage, your credit score significantly impacts your daily life. According to Experian, one of the major credit bureaus, the average FICO credit score was 715 as of the end of 2023; if you have that score, your score is good, but not excellent. You need a score between 740 and 850 to qualify for the best rates.

Understanding the factors that affect your credit, such as your credit mix, can help you develop a plan to improve and maintain your credit score.

Several factors affect your credit score. Although the formulas for calculating your score vary by the credit scoring model, all scores use the following factors:

  • Payment history: Your payment history reflects whether you pay your bills on time or have missed or made late payments in the past.

  • Credit utilization: Your credit utilization is how much of your available credit you use.

  • Length of credit history: The length of your credit history is how long you've had information reported to the credit bureaus.

  • New credit: New credit refers to the number of new accounts you've recently opened.

  • Credit mix: Your credit mix is the type of credit accounts under your name on your credit reports.

Credit mix is an important factor; creditors like to see that you can responsibly handle several forms of credit, such as revolving credit or installment loans. Revolving credit, such as lines of credit or credit cards, allows you to tap into your credit limit repeatedly. By contrast, installment loans give you a lump sum upfront and you repay it in monthly installments.

Common types of credit that can affect your credit mix include:

  • Credit cards, both secured and unsecured

  • Retail cards

  • Installment loans, including personal loans or car loans

  • Mortgage loans

The most common credit scores are the FICO and VantageScore scores. These scoring models use different formulas to calculate your score.

With the traditional FICO score, the most commonly used credit score, your credit mix makes up 10% of your credit score. As a result, your credit mix has a minor effect on your score.

The VantageScore model prioritizes your credit mix, which is considered a highly influential factor in determining your score.

Although your credit mix does play a role in determining your credit score, it's possible to have very good to excellent credit without having several different types of credit. It's never a good idea to apply for a new form of credit solely to boost your credit. That approach can be dangerous, causing you to take on unnecessary debt. Instead, use the following tips to establish or rebuild your credit:

  • Consider a secured credit card: A secured credit card is a form of revolving credit, useful for those with no credit history or troubled credit history. It requires a security deposit that serves as your credit limit. As you make payments on the card, it can help you establish good credit.

  • Apply for a credit-builder loan: Credit-builder loans are installment loans. With a credit-builder loan, you take out a loan, and the credit union or bank deposits into a separate account that it holds in your name. You make monthly payments until the loan is paid; those payments are reported to the credit bureaus. Once the loan is paid off, the lender releases the loan funds to you.

  • Think twice about closing an old credit account: Before closing an old credit account, consider keeping it open. Closing it can damage your credit mix and reduce your available credit, so leaving it open may be better unless it has a high annual fee.

Ideally, a good credit mix involves both revolving credit and installment loans. You don't need several forms of each type of credit; a single credit card and loan can be enough to build excellent credit if you use your credit responsibly and make timely payments.

A personal loan is a type of installment loan. A new personal loan can benefit your credit mix if you don't have existing installment loans open. If you use the loan to consolidate high-interest credit card debt, it can even improve your credit utilization and your credit score.

Avoid applying for new credit to improve your credit mix. Your credit mix is just one of several factors affecting your score. Keeping up with your payments, reducing your credit card balances, and monitoring your credit are other ways to benefit your credit without taking on more debt.

This article was edited by Rebecca McCracken

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