What comes to your mind when you hear the phrase “Credit Mix”. Most consumers imagine the credit pie chart that reveals the impact percentage of their payment history, credit length and utilization rates. Within the pie chart, there are two factors that make up 20% of your grade (new lines of credit and your credit mix). In today’s blog, we will go over what exactly makes up your “credit mix” and what types of accounts affect it.
Triple Threat: The Three Types of Credit Accounts
Revolving Accounts
The most common kind of revolving account that most consumers have are credit cards. Credit Cards are the most common type of revolving account as credit is allotted to you on a revolving basis. Each month, whenever you make a payment, the remaining balance on the card is rolled over into the next month. This balance can change the more you pay off or the more that you borrow and for the most part, changes constantly.
Installment Accounts
Installment accounts are normally associated with loans and require you to make set payments each month (installments). Personal loans, mortgages, car loans and student loans are all set in the category of Installement Accounts. The minimum payment on these accounts is set once the loan is first taken and have an agreed upon interest rate. These accounts can be paid off faster at the borrower’s desire by paying larger installments.
Open Accounts
Open accounts are an odd one when it comes to what is classified as credit or not. Open accounts are usually taken out with cable providers, phone companies, internet services or utilities. While these accounts normally do not report on time payments to the bureaus, open accounts can report unpaid balances to the credit bureaus to collect a debt after a certain amount of inactivity.
Raising Your Score
Each credit agency will report differently and calculate their own score using its own model and differences between reports can be vastly different. Because one item is reporting to one bureau does not mean that it will report to the rest. Be sure to keep each of the three types of account in check with a positive payment history as it is considered by banks and financial services when it comes to making a lending decision.
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