Understanding How Diverse Credit Can Boost Your Credit Score

Maximizing Your Financial Health. The Strategic Advantage of a Diverse Credit Portfolio.

Do you ever wondered how your credit score is calculated? One of the factors is your credit mix, which is the variety of credit accounts you have. This includes things like credit cards and different types of loans. Think of car loans or student loans aka (installment loans). It is important to know this because it makes up part of your credit score.

I have found having a diverse set of credit types can really help your have a higher credit score because it shows that you’re capable of managing different forms of borrowing. Though it only accounts for around 10% of your FICO Credit Score it can be a key player if your credit history is short or if you’re working on improving your credit score.

When you handle multiple types of credit well let’s just say lenders see you as a safer bet, which can help you get approved faster and more easily for new credit in the future and possibly snag lower interest rates. But here’s a word of caution: don’t pile on more debt than you can comfortably manage just to mix up your credit types. The real trick is to use credit wisely and keep things manageable and build over time.