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Credit Scoring Explained – Part 4 of 5

Whether it makes sense to most people or not, 10% of your credit score comes from your mix of credit. Mix of credit is exactly what it sounds like. Apparently, the credit bureaus don’t want you to neglect certain types of credit.

And if you think it sounds stupid that you would have a better credit score simply by having the right combination of types of credit, I would agree. Unfortunately, they didn’t give either you of me a chance to give our opinion on it.

While they won’t tell you what is the “ideal mix of credit”, I can tell you that the credit bureaus like you to have revolving accounts (credit cards), mortgage loans and installment loans like car loans.

The credit bureaus also don’t tell you how many of each account you should or shouldn’t have. From many years of experience in reading credit reports, I can tell you that the ideal number of accounts would include at least one mortgage, at least one car loan and about three to five credit cards.

Be aware that you can have either too few accounts or too many accounts. Too many mortgages, credit cards or car loans can be a negative just as having too few can also be a negative. And if you have too few accounts and little other information on your report, this area can have a bigger effect on your score.

What this information means is that there is an ideal mix of credit that the credit bureaus would like to see. Having something that doesn’t exactly fit their preferences can still result in good credit due to the other factors.

And since this area only makes up 10% of your score, focusing on the other areas like payment history and credit usage will yield more results. This one is a small piece of the puzzle

For more information about credit, you can find my book, Crack The Credit Code, To Play The Game, You Need To Know The Rules which is available on Amazon. Or, go to my website, CrackMyCredit.com.

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