- A credit mix refers to the different types of accounts you have, such as credit cards, student loans, mortgages, and car loans.
- Credit mix determines 10% of your FICO® credit score.
- It’s an indication of a borrower’s experience managing multiple types of loans.
What Does Credit Mix Mean?
Simply put, a credit mix refers to the different types of credit accounts you have, credit cards, auto loans, student loans, etc. It’s one of five factors in calculating our credit score, accounting for 10% of your overall score. Having a good credit mix shows lenders that you can manage different types of credit accounts.
What are the different types of credit?
For the most part, there are two kinds of credit: revolving and installment. Revolving credit lines don’t have a set payment or “end-date” like a mortgage would. Credit cards are the most common type of revolving account. You can make a payment, and go charge it again if you want to.
Installment accounts, on the other hand, have a fixed payment for a fixed amount of time. examples of installment loans would be auto loans, mortgages, student loans, etc. From our experience, the perfect mix of credit seems to be an auto loan, mortgage, and 2-3 revolving credit lines. This type of credit mix shows your ability to manage different types of credit
How does credit mix affect credit score?
As we mentioned earlier, your credit mix is only 10% of your overall credit score. What’s much more important is how you manage your loans. In fact, we have a client that is a couple of points off from 800, and she has a single retail card. So I wouldn’t go put a bunch of inquiries on my credit trying to reach that perfect mix of credit. If you already have a good credit score and you haven’t had a bunch of inquiries in the last year or two, sure, it may be worth filling in the missing pieces, but not something I’d lose sleep over.