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Variety is the Spice of Credit

Variety is the Spice of Credit

Your credit score is based on a wide variety of factors: Your payment history, how much credit you currently have, how much of that credit you are using, types of credit you are using, etc. We all know paying our bills on time can boost our credit scores, but did you know that having a mix of credit types could also help improve your score?

Credit scoring models favor people with a variety of types of credit: A mortgage, auto loans, and credit cards. Too much of one type of credit can negatively impact your score. In addition, revolving credit (like credit cards, meaning you can borrow money as you pay down your balance) tends to impact your score more negatively than an installment loan, like a car loan.

So if you want to improve your score and need to borrow money, consider taking a short-term bank loan instead of taking a cash advance from a credit card. Adding some variety to your credit life may spice up your credit score.

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