Credit mix refers to the variety of credit accounts you have on your credit report. These include car loans, credit cards, student loans, personal loans, among others.
Having a diverse mix of credit accounts shows to lenders that you can handle different types of credit in a responsible fashion.
Impact on credit score
Credit mix is one of the factors that affects your credit score, although it is not as significant as other factors such as credit utilisation and payment history.
Generally, having a mix of different types of credit can have a positive impact on your credit score. Lenders like to see that you can manage different kinds of debt responsibly. It means it can positively impact your credit score.
However, it’s vital to note that you shouldn’t take on new credit in order to improve your credit mix. Opening new accounts can, for the time being, lower your credit score due to inquiries and the average age of accounts.
Instead, focus on maintaining a mix of credit accounts over time and managing them responsibly.
A number of credit scoring models consider the diversity of your credit accounts at the time of calculating your credit score.
It is vital to note that the impact of credit mix on your credit score can vary based on individual circumstances and the particular credit scoring model that is being used.
Frequently Asked Questions:
What is credit mix?
This refers to the different credit accounts you have on your credit report. These include car loans, credit cards, student loans, personal loans, among others.
Does it affect the credit scoring model?
A number of credit scoring models consider the diversity of your credit accounts at the time of calculating your credit score.
ALSO READ: From high interest rate to limited funds, 5 main consequences of a low credit score
What are the factors on which the impact of credit mix on credit score is based on?
The impact of credit mix on your credit score can vary based on individual circumstances and the particular credit scoring model that is being used.
How does a credit mix impact the credit score?
Having a diverse mix of credit accounts shows to lenders that you can handle different types of credit in a responsible fashion
Is this advisable to take new credit to improve the credit mix?
It is not advisable to take on new credit in order to improve your credit mix.
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Published: 12 Mar 2024, 03:57 PM IST