Credit Mix

Full definition

Credit mix is a component of the FICO scoring model that evaluates the variety of credit types in your credit history. It accounts for approximately 10% of your FICO score. Lenders and scoring models reward credit mix because a borrower who has successfully managed multiple types of credit (revolving and installment) is considered a lower risk than one who has only managed one type. Revolving accounts: Credit cards and lines of credit, where the balance can fluctuate and you have a minimum required payment. These are evaluated partly based on utilization (how much of your available credit you're using). Installment accounts: Loans with fixed payments over a fixed term, including personal loans, auto loans, mortgages, and student loans. These are evaluated primarily on payment history. How a personal loan affects credit mix: If you currently have only credit cards, adding a personal loan can improve your credit mix score (the 10% component). This is why 'credit-builder loans,' specifically offered through credit unions and fintech lenders like Self, are effective: they add an installment tradeline to a thin credit file, improving both credit mix and payment history. Credit mix is not a reason to open accounts you don't need: While a diverse credit mix is slightly beneficial, opening new accounts primarily for mix improvement is generally not worth the temporary score damage from the hard inquiry and the reduced average account age. The 10% weight of credit mix is outweighed by the benefits of keeping existing accounts in good standing.

• Credit score
• FICO score
• Revolving credit
• Installment loan