Understanding Your Credit Mix

A healthy credit mix includes revolving and installment loans. Revolving credit are credit cards and retail cards while installment loans are mortgages, car loans, student loans, etc. However, this doesn’t mean you should go out and start acquiring new debt as this category only makes up 10% of your FICO score and it’s a hard inquiry which will impact your score negatively.

But, if this is something you are looking to improve, here are some suggestions:

Installment Loans

  • Personal loans can be obtained by your bank. A car loan is also a good choice.

Revolving Credit

  • Unsecured credit cards can be obtained by any bank. Nerdwallet offers a comparison of the best credit cards depending on your needs.
  • Retail credit cards have easier approval but much higher interest rates. This is only a good option if you will only charge what you can afford
  • If personal loans are not an option, Self Inc. claims they can raise your score 32 points. Before jumping in, consider that you would be paying a sign up fee and monthly interest, but they report timely, monthly payments to all credit bureaus and, at the end of your term, you have access to your savings.

Payday loans and title loans do not count towards your credit mix as these lenders do not report to the credit bureaus. However, if you default, these lenders will sell to collections agencies and they do report.

Mindful Reminder
Take time to observe your thoughts and emotions. What are they saying? Doing this check in and being realistic with yourself is important here. Yes, having a good credit score has a lot of benefits, but it’s equally important to know if you are capable of being responsible with new debt. Remember it’s only 10% of your FICO score and prompt, monthly payments are 35% while credit utilization is 30%. Be wise and honest with yourself.

References

Harzog, Beverly, Clark.com.  (2021). 5 sneaky ways to increase your credit score.. Retrieved from https://clark.com/credit/5-sneaky-ways-to-increase-your-credit-score/

Kumok, Zina, Experian.  (2019). How the right mix of credit can improve your credit score. Retrieved from https://www.experian.com/blogs/ask-experian/what-is-credit-mix-and-how-can-it-help-your-credit-score/

U.S. News Staff.  (2022). Best retail store credit cards of June 2022. Retrieved from https://money.usnews.com/credit-cards/store