Credit mix refers to the variety of lines of credit you have. According to Mr. Credit Card, credit mix makes up a full 10% of your FICO score.
Lately, a trend seems to be emerging where borrowers with solid income and good credit, 700+, are running into trouble getting approved for installment loans due to insufficient credit mix. We’ve included a graph of the search volume of “credit mix” and related terms on Google to show you just how quickly this issue has grown.
Huge spike in searches for "credit mix" on Google
In a way, borrowers with inadequate credit mix are incurring penalties for not having undertaken enough debt to prove their financial trustworthiness. Strange, we know.
Traditional wisdom says to pay for expensive items in cash if you can. That way you pay less overall — no interest. But given the credit crunch, lenders often want to see evidence of borrower behavior. So how to maximize your credit mix? Well, according to many sources, financing a car is one good way. Having an open installment loan (like a car loan) and making all of the payments on time can show lenders your financial diligence, making them more likely to approve big ticket loans like you need to buy a house or start a business.
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