At O1ne Mortgage, we understand that maintaining a good credit score is crucial for securing favorable mortgage terms. One often overlooked aspect of your credit score is your credit mix. In this article, we’ll explore what credit mix is, the different types of credit, and how you can improve your credit mix to boost your credit score.

What Is Credit Mix?

Credit mix refers to the variety of credit accounts you have. It is one of the five factors that determine your FICO® Score, accounting for 10% of your score. A well-diversified credit profile can indicate to lenders that you are a reliable borrower. While it’s not as impactful as other factors, a good credit mix can help elevate your credit score over time.

What Are the Different Types of Credit?

There are two main types of credit: revolving credit and installment credit. Having a mix of both can positively influence your credit score.

Revolving Credit

Revolving credit accounts come with a credit limit, which is the maximum amount you can borrow. You can borrow, repay, and borrow again up to this limit. Common types of revolving credit include:

• Credit cards
• Retail credit cards
• Home equity lines of credit
• Personal lines of credit

Installment Credit

Installment credit involves borrowing a lump sum of money and repaying it in equal installments over a set period. Common types of installment credit include:

• Mortgage loans
• Personal loans
• Auto loans
• Student loans

What Isn’t Part of Credit Mix?

Not all forms of credit are included in your credit mix. Loans that don’t appear on your credit report or are not part of credit score calculations include:

• Payday loans
• Auto title loans
• Buy now, pay later loans

However, if you default on these loans, the debt may be sent to a collection agency, which will be reported as a collection account. While this won’t impact your credit mix, it will negatively affect your payment history, the most influential factor in your credit score.

What Is a Good Credit Mix?

There is no ideal credit mix for an excellent credit score, but having at least one type of revolving credit and one type of installment credit is beneficial. Your credit mix will naturally evolve as you make financial moves throughout your life. For example, a recent college graduate paying off a student loan can improve their credit mix by opening their first credit card.

How to Improve Your Credit Mix

While your credit mix is unlikely to be a deciding factor in loan approvals, diversifying it can help improve your credit score. Here are some ways to enhance your credit mix:

Apply for Credit Only When Needed

Diversifying your credit mix is a long-term strategy. As you add new credit accounts, your credit mix will naturally improve. Consider new credit cards for better rewards, an auto loan for a new car, or a mortgage for a new home.

Become an Authorized User

If you’re new to building credit, getting approved for a credit card can be challenging. Ask a financially responsible loved one to add you as an authorized user on their credit card account. This will show up on your credit reports and help boost your credit mix.

Avoid Frequent Credit Applications

Applying for multiple credit accounts in a short period can damage your credit score and make it difficult to get approved for credit when you need it.

Monitor Your Credit Score to Track Your Progress

Whether you’re building or maintaining a good credit score, it’s important to monitor your credit regularly. With services like Experian, you can check your FICO® Score and credit report for free anytime. Real-time alerts can help you address potential issues quickly and spot inaccuracies or potential identity theft before they affect your credit score.

Contact O1ne Mortgage for Your Mortgage Needs

At O1ne Mortgage, we are committed to helping you achieve your financial goals. Whether you’re looking to buy a new home or refinance your existing mortgage, our team of experts is here to assist you. Call us today at 213-732-3074 for personalized mortgage services that cater to your unique needs.