Credit mix: What is it & how does it affect credit scores?
When it comes to credit scores, it’s easy to focus on loan payments and credit card balances. With good reason. But credit scores also account for smaller factors. One is credit mix. This snapshot of the different kinds of accounts you have—and how you manage them—accounts for 10% of FICO® calculations.
That doesn’t mean rushing to open a bunch of new loans will boost your credit scores. But knowing how your credit cards, car loan and mortgage affect your scores can be helpful before you apply.
What you’ll learn:
- Your credit mix is the combination of the credit accounts in your credit reports.
- Credit mix reflects experience managing multiple types of loans.
- Revolving accounts, such as credit cards, are an example of one type of credit.
- Installment accounts, such as car loans and mortgages, are another type.
What is credit mix?
Credit mix reflects the different accounts listed on your credit reports. Credit scorers like FICO categorize accounts in two ways: revolving and installment. Typically, a good credit mix includes a variety of each.
Why does credit mix matter?
FICO says that credit mix makes up 10% of its scores. That’s smaller than payment history (35%), the most important of FICO’s five scoring factors. But it’s still significant.
What are the different types of credit?
There are two types of accounts that can go in your credit report: installment credit accounts and revolving credit accounts. Here’s a closer look:
Installment credit accounts
Installment loans—also called installment credit or nonrevolving credit—are loans for a fixed amount that a borrower pays back in regular installments over a set period of time. Once the full amount is paid off, the lender typically closes the account.
Some common examples of installment loans include:
- Auto loans
- Mortgages
- Personal loans
- Student loans
Revolving credit accounts
Revolving credit refers to an open-ended credit account that lets you borrow up to a certain amount, pay down the balance and borrow up to that amount again while the account is open and in good standing.
These are a few common types of revolving credit accounts:
- Credit cards
- Home equity lines of credit
- Personal lines of credit
How does credit mix affect credit scores?
FICO says credit mix accounts for 10% of its scores. VantageScore credit scores reflect credit mix and credit age as part of the same factor. It calls this factor “depth of credit,” which its latest scoring model weighs at 20%.
How your scores might affect your ability to get a new credit card or be approved for a mortgage is a broader question. Because of how it weighs credit mix, FICO says it’s unlikely it will be the deciding factor when you apply for a loan. But the company acknowledges that it can still play a role.
Credit mix FAQ
Here are the answers to some frequently asked questions about credit mix:
What is a good credit mix?
According to FICO, a good credit mix consists of a combination of installment and revolving accounts. But it notes that how you use those accounts is more important, saying a great mix with a negative payment history will show up in its calculations.
How do I monitor credit scores?
One way to monitor your credit is with CreditWise from Capital One. CreditWise lets you check your FICO score for free—without hurting your credit scores.
What doesn’t impact credit mix?
If loans aren’t reported to credit bureaus, they won’t show up in the credit reports. As a result, they won’t factor into your credit mix. According to the Consumer Financial Protection Bureau, that’s often the case for accounts such as payday loans.
Key takeaways: What is credit mix?
Understanding credit mix and the role it plays in your credit scores can help guide your financial decisions. And regularly monitoring your credit can help you see exactly where you stand and how much progress you’ve made.
You can keep an eye on your credit using CreditWise. It’s free, even if you’re not a Capital One cardholder, and using it won’t hurt your credit scores.
