Credit Mix: How Different Credit Types Impact Your Score

If you are building credit, you have probably come across the term “credit mix.” But what does it mean? And why should you care about credit mix? Whether you are just starting your credit-building adventure or looking to level up your score, understanding credit mix is a must. Below, we will explore what credit mix is, how it impacts your credit score, and examples of different types of credit.

What is Credit Mix and Why Does it Matter?

Your credit mix refers to the different types of credit accounts you currently have. It makes up about 10% of your credit score. And while 10% might not seem like much, it can make a big difference when you are working toward a better credit score.

Lenders like to see a variety of credit types because it shows your ability to manage different forms of debt responsibly. Imagine a lender reviewing two applicants. One has only a single credit card, while the other has a mortgage, car loan, and a credit card—all handled well. Guess who feels like a safer choice? You got it! Managing a variety of credit types often demonstrates your trustworthiness, or “creditworthiness.”

If your credit mix isn’t strong, you could miss out on having a higher credit score. And why does that matter? Your credit score influences your access to loans, better interest rates, and other financial opportunities—keeping more money in your pocket.

Different Types of Credit

Broadly, there are three main categories of credit accounts making up your credit mix: revolving credit, installment credit, and open credit. Each has its own purpose and structure.

1. Revolving Credit

Revolving credit, also known as “open-ended credit” or a “credit line,” is a type of credit you can use repeatedly up to a set limit. It allows you to borrow, repay, and borrow again without needing to reapply. This type of credit is ideal for keeping your finances flexible.

Examples of revolving credit:

• Credit Cards: The most common example of revolving credit. Credit cards let you borrow money to make purchases at any store or business that accepts card payments.
• Lines of Credit: Flexible loans that let you borrow up to a set limit, repay, and borrow again as needed. They include home equity lines of credit (HELOCs), personal lines of credit, and business lines of credit, each serving different financial needs.
• Retail Store Credit Cards: These cards are issued by specific retailers, letting you shop at their stores while enjoying rewards or discounts along the way.

2. Installment Credit

With installment credit, you borrow a specific amount of money and repay it in set monthly payments over a designated period. Also called “closed-end credit,” “installment loans,” or “term loans,” installment credit typically comes with fixed terms and interest rates. Borrowers like this type of credit because it offers clear, predictable payments, which makes budgeting easier.

Examples of installment credit:

• Mortgages: Long-term home loans for purchasing property like houses or condos. Typically, these loans come with payment terms of 15 to 30 years, making homeownership more affordable through manageable monthly payments.
• Personal Loans: Borrowers receive a fixed amount of money to pay for different expenses. Personal loans are ideal for consolidating debt, covering emergencies, or funding big purchases.
• Auto Loans: Provide financing for new or used vehicles, paid off in monthly installments.
• Student Loans: Issued by the government, banks, and private lenders, these loans are designed to cover higher education costs. Repayment typically begins after graduation, though some loans require payments while still in school.
• Traditional Business Loans: These are loans from banks and lenders designed to help businesses cover expenses and fund growth. They are repaid with manageable monthly payments over time.

3. Open Credit

Open credit refers to accounts that must be paid in full each month. These accounts are different from revolving credit because they don’t allow you to carry a balance forward—everything is due by the end of the billing cycle.

Examples of open credit:

• Utility Bills: Payments for services like electricity, water, and gas, which change depending on how much you use. These bills must be paid in full each month to prevent service interruptions.
• Charge Cards: Unlike credit cards, charge cards let you make purchases but require full payment every billing cycle.
• Subscription Services: Includes services for streaming, internet, cable, and more. These must be repaid each month to keep the service active.
• Charge Accounts: Offered at hotels, country clubs, school bookstores, medical providers, and some local businesses, these accounts allow customers or members to add charges to their accounts and pay the full balance later, typically on a monthly basis.

By combining these three types of credit, you demonstrate to lenders that you can manage diverse financial obligations responsibly.

Improve Your Credit Mix at Academy Bank

Having a healthy credit mix is one of the easiest ways to maximize your credit score, but where should you start? At Academy Bank, we offer a full range of financial products to help you diversify and build your credit profile, all under one roof.

Here’s how Academy Bank can help:

• Mortgages: Take the first step toward homeownership with our competitive mortgage options.
• Credit Cards: Options range from standard cards for everyday spending to our special Credit Builder Secured Credit Card for building your credit score.
• Lines of Credit: Flexible options like our Home Equity Line of Credit (HELOC) and Business Line of Credit can help you reach your personal and professional financial goals.
• Personal Loans: Get access to quick cash for life’s big purchases with Academy Bank’s Express Loan.
• Business Loans: Fuel your entrepreneurial dreams with tailored loans for businesses.
• Bill Pay Online: Simplify life by paying all your bills in one convenient spot.
• My Finance360: Track your finances and manage all your bank accounts in one place with this handy online banking tool.

At Academy Bank, we are more than a bank—we are here to support your financial goals. Whether you are building credit, securing a loan, or managing your money, we have your back.

Visit Academy Bank and start building your credit mix today!