Adding a Mix to Your Credit Accounts

One great way to help boost your credit score is to have credit diversity, or a credit mix. This refers to the different kinds of credit accounts that are listed on your credit report. Here’s what you should know.

Credit Mix Basics

A credit mix refers to the accounts found on your credit report, from revolving credit (things like credit cards) to installment credit (things like a mortgage). The more diverse a mix you have, the more creditworthy lenders view your credit profile. A good mix (and good payment history with that mix) shows you can effectively handle different kinds of credit accounts.

Breaking Down the Credit Mix

A credit mix refers to the two types of credit you can have: revolving and installment. Here’s a quick breakdown:

• Revolving Credit. Revolving credit is credit that can be paid down over and over again. Examples of revolving credit include:

  • Credit Cards
  • Store Credit Cards
  • Home Equity Line of Credit (HELOC)
  • Personal Credit Line

• Installment Loans. Installment credit is credit that is only borrowed once, and you pay it down over time. Examples of installment loans include:

  • Auto Loan
  • Mortgage
  • Student Loans
  • Personal Loans

How a Mix Can Help Your Score

Credit diversity is one of several factors used by credit scoring models to determine your overall credit score.

• The FICO model says credit mix accounts for 10 percent of your score.
• The VantageScore* model says credit account mix makes up 11 percent of your score.

Remember, a good credit mix won’t mean much if you don’t pay those bills on time, every time. On-time payments are the biggest influence on your credit score for both FICO and VantageScore.

Do One Thing: Create a solid credit mix, but only if you can safely handle the debts.

*based on VantageScore 3.0