But if you want a top FICO score — the kind that gets you the best rates, the highest limits and the sweetest deals — you may have to mix it up a bit. A good goal to shoot for is having at least 1 revolving account and 1 installment account open. Keep in mind that lenders could still approve credit applications without a robust credit mix. However, having a strong credit mix can strengthen your credit snapshot. Again, since credit mix is only 10% of your FICO Score, it most likely won’t determine whether or not you obtain credit from lenders. However, if you’re striving to bring your FICO Score to the highest level it can be, your credit mix can play a part.

Opening new accounts can, for the time being, lower your credit score due to inquiries and the average age of accounts. Having a diverse mix of credit accounts shows to lenders that you can handle different types of credit in a responsible fashion. Understanding the factors that go into credit scores can help you recognize the connections between your behaviors and your scores. Those with the highest credit scores tend to have utilization ratios below 10%, but the lower, the better. Broadly speaking, keep your credit utilization ratio below 30% to avoid a more substantial negative impact on your credit scores.

Closing a card with an unpaid balance can negatively affect your credit score and lead to additional interest or fees. This leads to a higher credit utilisation ratio, and using more than 30% of your available credit can harm your score. You can also pay off your installment loans at the agreed upon steady rate as opposed to paying off a loan in full if you have the money to do so. They are secured by the value of your vehicle, which means the bank can take ownership of your car if you default on the loan.

• FICO not only looks at the mix of credit you have but also at the payment history of these credit types.
• However, if your goal is to have the best credit score possible you may want to consider diversifying your accounts.
• However, look for options that don’t charge lots of fees or interest.
• But you don’t need to be a master conductor to understand the composition of your credit portfolio.

Reduce Credit Utilisation Ratio

But if your file is “thin” (you are new to credit or other factors), the effect can be more pronounced. An installment credit line is a line of credit that you usually pay a fixed amount each month for until you pay off the entire balance over time. There’s conflicting information on how much having different types of installment and revolving accounts affects your score. Offer pros and cons are determined by our editorial team, based on independent research. The banks, lenders, and credit card companies are not responsible for any content posted on this site and do not endorse or guarantee any reviews. Your lender or insurer may use a different FICO® Score than FICO® Score 8, or another type of credit score altogether.

• Spending the same ₹30,000 now results in a utilisation ratio of 60%, which can significantly reduce your credit score.
• A personal installment loan can also help you twice if you move high interest credit card debt to a personal loan.
• All information, including rates and fees, are accurate as of the date of publication and are updated as provided by our partners.
• And don’t forget, there’s many different models of your FICO score, some of which are specifically tailored to different industries.

Other factors, such as our own proprietary website rules and the likelihood of applicants’ credit approval also impact how and where products appear on this site. CreditCards.com credit ranges are derived from FICO® Score 8, which is one of many different types of credit scores. If you apply for a credit card, the lender may use a different credit score when considering your application for credit. ADVERTISER DISCLOSURE CreditCards.com is an independent, advertising-supported comparison service.

In fact,10% of your score depends on how many types of credit you have. Closing a card reduces your total available credit, which can increase your credit utilisation ratio. It may also lower the average length of your credit history over time. In other words, having a healthy credit mix isn’t a synonym for having a better credit score. You should also focus on the other factors and assess whether taking out loans or opening new credit accounts is the right financial decision for your current situation. According to Experian®, an ideal credit mix will have revolving and installment credit.

Tips to Improve Loan Approval Chances

Focus on reducing credit utilisation, timely payments, and avoiding unnecessary credit inquiries. Regularly monitoring your credit report for errors and disputing inaccuracies can also contribute to score improvement. Timely payments demonstrate financial responsibility and positively impact your credit score. Missing payments can lead to penalties and a negative mark on your credit report, which may take time to rectify.

Ensuring your credit report is accurate is essential for maintaining a healthy credit score. Utilise free credit monitoring tools available from various financial institutions. Regularly checking your credit report helps you stay informed about your score and identify areas needing improvement. Ensure the tools are from reputable sources to get accurate information. A 660 CIBIL score falls within the ‘fair’ range, typically spanning from 600 to 699.

How to Improve Eligibility

That’s because FICO says having a variety of loans is necessary to maximize your credit score. If you don’t have several different types of loans, it won’t kill your score. After all, the “types of credit” component is the least important of the five factors in FICO’s formula. But if you’re striving for scoring perfection, a good credit mix can push you toward the top of the range.

You could round out your credit mix by taking out a small personal loan, which would give you some installment debt to repay. A revolving credit account allows you to borrow money consistently and pay it back at your pace. It usually comprises a set credit limit, payment due date, and minimum payments.

How much personal loan can I get with a 660 CIBIL score?

Payment history has the single biggest impact on your credit, which means paying your bills on time every month is key to how does credit mix affect credit score building and maintaining good credit. Just one payment made 30 days late or more can do significant harm to your scores, and the negative impact can become more severe the further behind you fall on payments. An account sent to collections, a foreclosure or a bankruptcy can have even deeper, longer-lasting consequences. If you have a credit card and don’t have an installment loan, lending circle or secured credit-builder loans could be good options. These are created to help borrowers build credit rather than finance purchases, so they tend to have minimal fees and interest. Long-standing credit accounts contribute positively to your credit history.

Of course, every situation is different, and the best way to improve your credit mix will depend on your circumstances. If you want to improve your credit mix and overall credit health, consider using CreditRepair.com’s Credit Snapshot Tool. This tool provides an assessment of your credit situation and can help you get personalized advice for improving your credit mix and score. Credit mix refers to the various types of credit accounts you have and accounts for 10 percent of your FICO® credit score. Revolving credit doesn’t have a specific balance and its due date varies depending on how often you access this type of credit.

Instead, lenders want to see a balance between installment debt and revolving debt. A closed credit card may remain on your CIBIL report for approximately 7 to 10 years. This ratio indicates how much credit you use compared to your total credit limit. Calculate it by dividing your total outstanding by your total credit limit, then multiplying by 100 to get a percentage.

You could have 5 accounts reporting to the credit bureaus, but if all of them are revolving accounts, this will be bad for your credit mix. Some advisers claim that you should have one installment loan for every 3 to 5 credit cards. However, others believe that it is important just to have at least one type of installment and at least one type of revolving credit line. Recurring payments to utilities and other services such as cable and cellphone are not traditionally included in credit reports. However, if you share your payment history through the Experian Boost®ø feature, these payments could immediately benefit your FICO® Scores based on Experian credit data. VantageScore credit scoring factors differ somewhat, but adopting the habits described below will promote improvement on any credit score derived from credit report data.

If you have a thin credit file you may have a low credit score even if you have made payments regularly. You may not have enough information in your file to generate a score. When lenders are trying to decide whether you’re a suitable candidate for credit, they consider various factors. FICO, in particular, looks at the following factors to calculate your score. Again, as noted above, all credit falls under one of four categories.