Adding a Mix to Your Credit Accounts

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

The 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 of a mix you have, the more creditworthy lenders will see you. A good mix shows you can handle different kinds of credit accounts.

The Mix

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

• Revolving. Revolving credit is credit that can be paid down over and over again. Think credit cards.

• Installment. Installment credit is credit that is only borrowed once and you pay it down over time. Think mortgages or student loans.

How a Mix Can Help

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 mix makes up 20 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.