What is a Good Mix of Credit?

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Having a “Good Mix of Credit” is basically ten percent of your FICO score – so what does that mean exactly?

Contrary to popular belief, it does not mean that you should have an Amex, Visa, MasterCard, and Discover Card. Instead it means that you should have different types of credit lines open to improve your credit score.

For example, a good mix of credit would include:

  • A mortgage
  • A car loan
  • A couple of major credit cards like Amex or Visa
  • And one or two department store or gas credit cards.

Now, if you don’t have all of these loans, it does not necessarily mean that you need to immediately run out and get them to raise your credit score. Remember, the types of loans you have only make up ten percent of your score overall.

This is where your credit score vs. your financial sense has to come into play. Yes – it might raise your credit score for you to go out and get an auto loan. BUT, if you can afford to a used car outright, then it makes more sense financially to the car without an installment plan, and avoid paying interest on the loan.

Keep in mind that opening new credit accounts temporarily lowers your score. If you do decide that you want to open a couple new cards to improve your credit mix, them make sure you only open one account every 4-6 months or so. That will give your score time to recover before each new account.

The most important factor in your credit score in undeniably carrying a low (or zero balance) and making on-time payments. Having a good mix of credit is like the icing on the cake – not the foundation of your score.

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