What is a Credit Mix?

Credit mix refers to the variety of credit accounts you have. While it only makes up 10% of your FICO Score, having different types of credit accounts can help your score over time.

The basics of credit mix

Your credit mix is one of five factors that determine your FICO Score. It basically shows lenders that you can handle different types of borrowing responsibly.

As you naturally open different accounts throughout life, a diverse mix can help push a good credit score into excellent territory.

But don't open new accounts just to improve this factor. Credit mix has a smaller impact than other factors, and the potential downsides of new accounts (hard inquiries or missed payments) could hurt more than help.

Types of credit that count

There are two main types:

Revolving Credit - Accounts where you can borrow up to a limit, repay, and borrow again:

• Credit cards

• Retail store cards

• Home equity lines of credit

• Personal lines of credit

Installment Credit - Fixed loans you repay in equal payments over time:

• Mortgages

• Personal loans

• Car loans

• Student loans

What doesn't count

Some financial products don't affect your credit mix:

• Payday loans

• Auto title loans

• Buy now, pay later services

But if you don't repay these debts and they go to collections, they'll show up as negative marks on your payment history - the most important credit score factor.

What's a good mix?

There's no perfect formula, but having at least one revolving account and one installment account is a good foundation.

Your mix naturally develops as you make financial moves through life. For example, a recent graduate with student loans who opens their first credit card automatically improves their credit mix.

Smart ways to improve your mix

1. Apply for credit only when you need it - Your mix will naturally diversify as you take on credit for normal life needs.

2. Become an authorized user - If you're new to credit, ask a financially responsible person to add you to their credit card account.

3. Avoid frequent applications - Opening many accounts quickly can damage your score and make approval harder when you really need credit.

Keep track of your progress

Having both revolving accounts (like credit cards) and installment loans (like mortgages) shows lenders you can handle different financial responsibilities. But don't open accounts just to check a box.

Your credit mix naturally improves as you go through life's financial stages. Focus instead on paying bills on time, keeping balances low, and only applying for credit you actually need.

Check your credit regularly using KOHO to monitor your credit score and credit report.