Credit Mix

What Is a Credit Mix?

Credit mix refers to the types of accounts that make up your credit report. Credit mix determines 10% of your FICO score. The different types of credit that might be part of your credit mix include credit cards, student loans, automobile loans, and mortgages. Credit mix might have a larger impact on your credit score if your credit history is particularly sparse.

How Credit Mixes Work

Credit scores take credit mixes into account in order to establish a more comprehensive profile regarding your payment history, trustworthiness, and ability to successfully manage different types of credit. Though having a mix of different types of loans on your credit report can have a positive impact on your credit score, FICO (and common sense) cautions that you should not apply for loans or credit cards you do not need in an attempt to improve this component of your credit score. Not only is your credit mix a small part of your credit score; opening new accounts also affects other factors in your credit score that carry greater weight, such as the length of your credit history, amounts owed, and the number of new accounts.

Creditors do not always report every account to every credit bureau, which explains why your credit score can vary among the three top bureaus: Experian, Equifax, and TransUnion.

Risks of Pursuing a Diverse Credit Mix Too Aggressively

There is no way for you to tell ahead of time exactly how a certain action will affect your credit score because the number depends on the unique information within the credit report. Taking out an auto loan, for example, might have a greater effect on one consumer’s score than another’s, depending on how long each consumer’s credit history is, how much other credit they have available, how much debt they have, and their payment history.

What’s more, creditors do not always report every account to every credit bureau. This means that opening a new account to try to get a better credit mix might end up making no difference in the score. Still, FICO says that consumers with responsibly managed credit cards in their credit mix tend to have higher scores than consumers with few or no credit cards in their credit mix.

It is not uncommon to begin your credit history with a student loan, followed by a small personal loan or credit card with a low available balance. As you enter the workforce and earn income, you typically take on additional forms of credit to accommodate your needs. This can include applying for credit cards with higher available balances and taking out a home mortgage.

With the introduction of each new form of credit, your history will reflect that your mix is growing more diverse. By maintaining different types of credit over longer periods, both revolving credit and installment debt, you can retain this mix and demonstrate a high degree of responsibility with your finances.