January 25, 2009

The last part is your credit mix and it equates to 10% of your credit score.  This section is almost ambiguous in explanation because there is little to find about credit mix.  Its description is what types of credit are you using.  Credit scores like to see a Healthy Mix of credit.

This means you don’t want to just have twenty credit cards, but a range of different credit accounts.  It is best to have a mortgage, auto loan, installment loan, and some credit cards.  This shows you can manage all different types of debt and will positively effect your credit score.

Here is a little quote from MyFICO about consumer credit obligations:

On average, today’s consumer has a total of 13 credit obligations on record at a credit bureau. These include credit cards (such as department store charge cards, gas cards, or bank cards) and installment loans (auto loans, mortgage loans, student loans, etc.). Not included are savings and checking accounts (typically not reported to a credit bureau). Of these 13 credit obligations, 9 are likely to be credit cards and 4 are likely to be installment loans.

A common problem here for most American consumers is they have too many credit card accounts.  Stick to a few and don’t apply for every store credit card they offer you.  The 10% in the front might be great, but it could have some lasting effects on your credit score.