Credit Score Components - Your Credit "Mix"

Having only credit card accounts, even if they are in good standing, can be perceived less favorably by lenders than having a mix of various debt sources.

Your FICO Score is comprised of five factors:

    • Your payment history 35%
    • The amount of money you owe 30%
    • The length of your credit history 15%
    • New debt and credit inquiries 10%
    • Your credit mix 10% (discussed on this page)

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Your credit mix - the type of debt you have matters

Lenders like to see a "healthy mix" of credit. Different lenders define "healthy" differently, but the FICO score standardizes these differences across all lenders who use this formula to figure out your score. For this reason, it is helpful to have a healthy mix of debt sources.

Having many credit card accounts, even if they are in good standing, can be perceived less favorably than having a mix of the following types of credit:

    • Revolving accounts (credit cards)
    • Home mortgage
    • Home equity loan
    • Vehicle loans


Of course, we are not suggesting that you go out and buy a home just to raise your credit score (unless you really want to), but if you own your home, and can get a card tied to a home equity line of credit, this may be a better choice than several credit cards.

It may be difficult to know where you stand on this last factor, but it is the least important of the five.

When it comes time to look for a home loan, you will find that having a marginal score will affect the rate you'll pay, and even your ability to get a mortgage. For this reason, it is recommended that you get at least one other type of loan besides a credit card a year or two before buying a home. An auto loan is perfect for this purpose.

A Few Quick Tips

Your credit score changes constantly.
The good thing about your FICO credit score is that it changes to reflect your most recent behavior. Every time you make a credit card payment your FICO credit score shifts a little. Even a dismal FICO credit score can be improved with responsible credit behavior. It's never too late to start.

The importance of each factor varies from person to person.
Don't worry if you're weak in one realm. A strong showing in another can make up for it.

Lenders look at other information
While a decent FICO credit score is undoubtedly important, it's not all a lender will consider. Higher education or a strong employment history can also be taken into consideration and can outweigh some of the negative factors.

Time to check your score

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