Your Fix of the Mix
We all know the importance of having a good credit score. With a high credit score, you can open to door to better interest rates, loans, benefits and more! Good credit can be the deciding factor in whether or not you get approved to rent a home or get a particular job. Therefore, it’s is important to fully understand the various factors that make up your credit, including the credit mix.
To clarify, credit mix is not the most important factor in determining your score. Your payment history carries the majority of the weight, followed by your credit utilization rate and then your credit history and longevity. The good news is, your credit mix comprises only 10% of your credit score! In the end, your credit mix determines your credit health and can be a beneficial indicator of your credit prowess!
What are the two types of credit accounts?
What exactly is credit mix you might ask? Credit mix refers the different types of accounts associated with your credit report and usually fall into two categories:
- Installment loans, in which you borrow a specific amount and have payments due each month for a specific amount of time.
- Revolving credit, in which you borrow as much you need and pay it back in either a minimum or full payment until the amount owed is fully paid.
Examples of installment loans are home loans, auto loans, and personal loans. Revolving credit refers to credit cards; although home equity lines of credit are another example.
