How Credit Mix Affects Your Credit Score
According to FICO, credit mix accounts for about 10% of your FICO Score, a scoring model widely used by lenders. While not as critical as payment history (35%) or amounts owed (30%), a healthy credit mix can be the deciding factor when your score is on the border between credit tiers. It demonstrates to lenders that you can manage different types of financial obligations simultaneously.
Credit scoring models reward borrowers who successfully manage both revolving and installment accounts, as it indicates financial versatility and reduces perceived risk.
Types of Credit: Revolving vs. Installment Accounts
Your credit mix is primarily composed of two categories of credit products:
- Revolving Credit: This is an open-ended line of credit that you can borrow from, repay, and use again. Your payments vary based on your outstanding balance. Examples include credit cards, home equity lines of credit (HELOCs), and personal lines of credit.
- Installment Credit: This is a loan for a fixed amount of money that you repay with equal, scheduled payments over a set term. Once the loan is fully repaid, the account is closed. Common examples are mortgages, auto loans, student loans, and personal loans.
| Credit Type | How It Works | Common Examples |
|---|---|---|
| Revolving Credit | A flexible credit limit you can use repeatedly; monthly payments vary. | Credit Cards, HELOCs |
| Installment Credit | A fixed loan amount repaid in equal installments over a set period. | Mortgages, Auto Loans, Personal Loans |
How to Responsibly Build Your Credit Mix
Improving your credit mix should be a natural result of your financial journey, not a goal in itself. Never take on debt you don’t need simply to diversify your credit profile. The interest paid and the risk of missing payments will almost always outweigh the minor benefit to your score.
- Focus on the Fundamentals First: Before optimizing your credit mix, master the most important factors. Always pay your bills on time and keep your credit utilization ratio low—ideally below 30%.
- Add New Credit Types Organically: When you are ready for a major purchase, such as a car or a home, the associated installment loan will naturally diversify your profile. If you only have installment loans (like student loans), consider opening a credit card when you can manage it responsibly.
- Avoid Opening Too Many Accounts at Once: Each application for new credit can trigger a hard inquiry, which may temporarily lower your credit score. Opening several accounts in a short period also lowers the average age of your credit history, another key scoring factor.
Note: There is no “ideal” number of accounts. A healthy mix can consist of just one or two credit cards and one installment loan, as long as they are managed well over time.
For more information on credit scoring, you can visit the Consumer Financial Protection Bureau.