What Is Credit Mix and How Does It Affect Your Score?
Written by
Emily Gadd
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GOBankingRates Staff
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When you check your credit score, you may notice a section called credit mix. Credit mix is how many types of credit you have open. It’s worth 10% of your FICO score and is one of the five factors that make up your credit score.
Your credit mix is important because it shows lenders that you can responsibly manage several different types of accounts.Â
Types of Credit That Make Up a Good Credit Mix
There are two main types of credit: installment loans and open credit.Â
Installment loans show that you can pay off large sums of money over a long period of time. They include:
- Auto loans
- Student loans
- Personal loans
- Mortgages
Revolving accounts show that you can borrow and pay back money in short periods of time. They include:
- Credit cards
- HELOC or home equity line of credit
- Retail credit cards
Do You Need a Perfect Credit Mix to Have a Good Score?
No. Remember that credit mix only accounts for 10% of your overall score. The other factors are:Â
- Debts owed (30%)
- New credit (10%)
- Length of credit history (15%)
- Payment history (35%)
If you’re trying to raise your credit score, it’s better to focus on debts owed and payment history. That means making sure you’re only using a low amount of the credit you have open and paying all of your accounts on time.Â
How to Improve Your Credit Mix
Become an authorized user. Your spouse or family member can add you as an authorized user to their credit card. This can help you get more types of credit on your history.
Open new credit as you need it. Opening too many new lines of credit or opening credit that you can’t pay off will hurt your score.
Remember that the hard pull most lenders will require might cause a small but temporary drop to your score. You can also be penalized for opening too many new credit lines in a short period of time.
The Bottom Line
Excellent credit doesn’t happen overnight. It takes years and years of responsible behavior to get there. You’ll get faster results if you focus on having low credit utilization and making all payments on time then opening a bunch of new accounts.
FAQ
- What is credit mix in a credit score?
- Credit mix measures the types of credit lines you have open. For example, having a credit card and a student loan are considered two different types of credit.
- How much does credit mix affect my credit score?
- Credit mix accounts for 10% of your credit score.
- Do I need both credit cards and loans to have a good credit score?
- No. It’s more important to have low credit utilization and pay all of your accounts on time.
- Can having only one type of credit hurt my credit score?
- It might, but it only makes up a very small percentage of your credit score.
- How can I improve my credit mix without taking on too much debt?
- Only open accounts you can afford to pay off. If your credit report says that your credit mix is negatively impacting your score, you could open or close different types of accounts to balance it out. However, closing accounts and opening new accounts can also negatively affect your credit score.
