Have you ever wondered about the secret recipe behind your credit score? While some ingredients are straightforward, others can be confusing or open to interpretation. One such element is the “credit account mix,” which may leave you with mixed feelings. Let’s shed some light on this topic and gain a better understanding.
The Credit Account Mix Demystified
Your credit account mix refers to the blend of different types of credit in your financial portfolio. It goes beyond simply having multiple credit lines—it showcases your ability to handle various types of debts successfully. From cards to car loans and mortgages, each account type adds to your credit mix.
Why it Matters
Lenders value a diverse credit mix as it demonstrates your capability to manage different financial obligations simultaneously. Being able to handle both installment loans (e.g., mortgages, car loans) and revolving credit (credit cards) reflects positively on your creditworthiness. It instills confidence in lenders that you will repay borrowed money reliably.
VantageScore and Credit Account Mix
VantageScore, one of the prominent credit scoring agencies, emphasizes the significance of credit mix in its scoring model. In addition, VantageScore also considers credit experience. A varied credit mix, consisting of different types of products, indicates your expertise in managing diverse financial responsibilities.
How it Works With FICO
FICO, another major reporting agency, assigns a 10% weight to credit mix in its scoring model. Although this may appear relatively small, it shouldn’t be underestimated. FICO not only evaluates the types of credit you possess but also scrutinizes the payment history associated with each loan. A solid credit mix won’t compensate for a questionable payment history, as payment track record contributes 35% to your FICO score.
How You Can Build and Improve
If you currently lack a diverse credit mix, there’s no need to panic or rush into applying for multiple credit cards or loans. Haphazardly pursuing such avenues can harm your credit score. Remember, every loan application triggers a hard inquiry, which can cause a slight score drop. The most effective way to build and enhance your credit score is by consistently paying your bills on time, without exception.
The Family Credit Union and CreditSense
The Family Credit Union offers Credit Sense, powered by SavvyMoney®, is a tool that provides you ongoing access to your credit score, along with recommendations on how to improve it. Credit Sense℠ gives you the ability to monitor, improve, and ultimately save you money by managing your credit scores.
Remember, a well-balanced credit mix can unlock favorable borrowing rates and potentially save you thousands on loans for significant investments like homes or cars. Stay informed and proactive, and watch your credit score soar!
Now, access your credit scores from anywhere, anytime within your Home Banking session or in the Mobile Money app.
