Credit Mix – How This Often Overlooked Factor Affects Your Credit

Most of us have a basic understanding of what goes into calculating our credit score. Factors such as late payments, maxed out credit cards, or any collections debt are all common knowledge. There is, however, one credit calculation that often goes unnoticed. Read further to learn about credit mix - how this often overlooked factor affects your credit.

What is credit mix?

Credit mix refers to the different types of credit accounts you have. There are two primary types of credit:

Revolving Credit - Revolving credit is credit that continuously becomes available to you as you pay it back each month. A great example of revolving credit is a credit card.

Installment Credit - Installment credit is when you borrow a lump sum that you pay back in installments each month. An example of this type of credit would be a term loan.

Different types of credit usually fall into either of these two credit categories. For instance, a line of credit falls under the revolving category while a car loan or mortgage are forms of installment credit.

How Diversity Helps

Having a credit mix, or a combination of both installment and revolving credit will benefit your credit score. It gives any potential lender a broader picture of what type of borrower you are and how you can handle a diverse range of credit products. If you can manage to keep both installment and revolving credit in good standing at the same time, you’re likely a responsible borrower.

In order to maximize your credit score, you should consider your mix of credit. If you need a low-risk loan to diversify your credit history, consider the secured savings loan from Refresh Financial. It’s a great credit builder and can help you broaden your credit products. Click here for more information.

Did you know that your credit mix is a factor when calculating your credit score? What type of credit mix do you have? Let us know in the comments!