Switch to ADA Accessible Theme
Close Menu
Florida Bankruptcy Lawyer
Call Today For A Free Consultation 866-907-2970 Hablamos Español

$0 down and low payment plans available. We can assist you without having to leave your home.

Credit Mix


Is it better to owe money to just one creditor or many?  Should you take on more debt because it is good debt?  Paying off your debts is hard enough, but trying to rationalize why certain debts are good or bad is downright confusing.  It makes sense to take out a home mortgage, because with every installment payment, you build equity in your house, instead of enriching your landlord while your credit score doesn’t budge, but when you get into questions about the ideal amount of bad debt, the chorus of voices starts to sound like an economists’ happy hour, all heated debate over speculative premises, and little practical advice.  Credit mix sounds like a personal finance buzzword, but it is actually simpler than its name suggests.  For help finding out whether it is worthwhile to take on more money in order to improve your credit mix, contact a Plantation debt lawyer.

What Is Credit Mix?

In the context of credit scores and credit reporting bureaus, credit mix refers to whether you have revolving credit, installment loans, or both.  Revolving credit is where X amount of credit is available to you at all times, and after you pay it off, you can borrow it again, as many times as you wish.  Examples of revolving credit are credit cards and home equity lines of credit.  In other words, X refers to your credit limit; your balance changes each month, but your credit does not.  Installment loans are where the lender gives you all the money upfront, and you must pay it back in installments until the balance is zero.  Examples of installment loans include car loans and personal loans.  Whether the debt is secured or unsecured is not a factor in determining your credit mix.

How Does Credit Mix Affect Your Creditworthiness?

There are several ways to calculate a consumer’s credit score.  FICO, which is the traditional formula for calculating credit scores, assigns credit mix a weight of ten percent.  VantageScore, a newer method, weights it more heavily.

What Is the Ideal Credit Mix?

The ideal credit mix is at least one revolving credit and at least one revolving loan.  If you have one credit card and one car loan, your credit mix is already perfect.  Having more than one of either type of credit, or of both kinds, will not improve your credit mix.  Taking on more debt will never improve your credit score, except if you consolidate your debt by borrowing a low interest personal loan and use it to pay down other debts or pay them off completely.  If you have only one credit card and you pay the balance down to zero with a debt consolidation loan, this will not negatively affect your credit mix, as long as you do not close your credit card account.

Work With a Debt Lawyer About Credit Mix

A South Florida debt lawyer can help you improve your credit mix and other aspects of your credit score.  Contact Nowack & Olson, PLLC in Plantation, Florida to discuss your case.



Facebook Twitter LinkedIn