Get in the Credit Mix: Why Diversification Is Important

Credit bureaus look at several factors when determining your score. This includes how long you’ve had credit, your payment history, and your credit utilization rate (which measures how much of your available credit is currently in use), among other things. One that’s sometimes overlooked is credit mix. Lenders like to see a variety of credit, such as credit cards and loans, on top of your ability to responsibly manage them. 

What are my credit options? 

There are two credit types to familiarize yourself with: installment and revolving. Satisfying both buckets is all that’s needed to establish a good credit mix. 

• Installment credit. Installment credit products have a term length and include an amortization schedule that explains how the borrower can gradually reduce the principal amount owed through installment payments over time. Some common examples include personal, auto, mortgage, and student loans.  
• Revolving credit. Revolving credit products don’t have a term length. Instead, you can borrow funds up to a set credit limit as many times as you’d like. Credit cards and home equity lines of credit (HELOC) are two examples to consider. 

Note that payday and title loans are not part of the credit mix. That’s because, unless you default on them, they are not reported by lenders to the credit bureaus.  

What if I don’t have a good credit mix? 

If you don’t currently have credit products in both buckets, you may be looking to mix things up! But pump the breaks before you do. Diversified credit carries less weight than payment history or the amount you owe when it comes to calculating your credit score. For this reason, don’t just apply for a credit product for the sake of diversification alone. Only apply for credit that makes sense for you and satisfies your unique borrowing needs. 

If you already have a credit card and a type of loan, your bases are covered! Now it’s just a matter of responsibly managing those accounts and making on-time payments to maintain a good credit score. You can accomplish the latter with tools like account alerts, which will send you a notification when a payment is coming due, as well as Money Management. This intuitive budgeting platform will help you strategize debt payoff and pinpoint spending categories that may be throwing your payment plan off track.

General Electric Credit Union (GECU) members have access to a wide range of borrowing opportunities. From low-rate credit cards (including those with the ability to earn unlimited cash back)¹ to mortgage loans and HELOCs, there’s a solution for everyone. Plus, our Online Banking and mobile app users get access to their FICO® Scores for free! 

Becoming a member is easy. First, confirm your eligibility. If you live, work, worship, or attend school in select Ohio, Kentucky, or Indiana counties, you can bank with us! Then, apply for your preferred credit product online and manage payments through Online Banking or our mobile app.²