If you have at least one credit card and a car payment and/or student loan in your name, you may be surprised to learn that you already have a good credit mix.
The two most common types of credit accounts are revolving and installment credit. Both can have an impact your credit score, however their borrowing and payment structures differ.
Your credit card account, which you charge and make varying payments on each month, counts as revolving credit. Your balance is forever changing and there is no particular end date to having this type of credit (unless, of course, you close your credit card account).
Your car payment or student loan, for which you make the same, fixed payment on each month, counts as installment credit. With this type of credit, you have a set balance divided out equally into a series of payments due each month until the specified end date.
Having both revolving and installment credit makes for a perfect duo because the two demonstrate your ability to manage different types of debt. And experts would agree: According to Experian, one of the three main credit bureaus, "an ideal credit mix includes a blend of revolving and installment credit."
How to get a good credit mix
If you are aiming to achieve a good credit mix, first know what counts as installment credit: student loans, auto loans, mortgages and personal loans. Since there's a good chance you already have an installment account in your name, now you just need to focus on paying it off within the window of time specified. Do this by making sure your set monthly payments are made in full and on time when due.
For those who are new to credit cards, consider opening one to have some form of revolving credit and use it wisely — only charge what you know you can pay off in full by the due date. This way, you never have to pay interest on a revolving balance.
Credit card beginners should start with cards that are geared toward building credit. For example, the Capital One Platinum Secured Credit Card has no annual fee (see rates and fees) and varying minimum security deposits starting at $49, $99 or $200 — based on your creditworthiness. (See rates and fees).
Most secured credit cards require a deposit upfront that is equal to your credit limit (usually $200), but qualifying cardholders of the Capital One Secured can still access a $200 credit limit while only depositing a minimum deposit as low as $49 or $99. In addition to lower security deposits, Capital One gives cardholders access to a higher credit limit after making their first five monthly payments on time.
Capital One Platinum Secured Credit Card
Rewards
None
Welcome bonus
No current offer
Annual fee
$0
Intro APR
N/A for purchases and balance transfers
Regular APR
29.99% variable
Balance transfer fee
$0 at the Transfer APR, 4% of the amount of each transferred balance that posts to your account at a promotional APR that Capital One may offer to you
Foreign transaction fee
None
Credit needed
No credit history
See rates and fees, terms apply.
Pros
- No annual fee
- $49, $99 or $200 refundable deposit
- No fee charged on purchases made outside the U.S.
- Flexibility to change your payment due date
Cons
- High variable APR
- No rewards program
For those looking to open a revolving credit account and have only a fair credit score, consider the Capital One Platinum Credit Card. (See rates and fees). This card is open to applicants with less-than-stellar credit ( Fair/Good) and comes with no annual fee (see rates and fees) nor foreign transaction fees (see rates and fees) for those traveling outside the U.S.
Capital One Platinum Credit Card
Rewards
None
Welcome bonus
None
Annual fee
$0
Intro APR
None
Regular APR
29.99% variable
Balance transfer fee
$0 at the Transfer APR, 4% of the amount of each transferred balance that posts to your account at a promotional APR that Capital One may offer to you
Foreign transaction fee
None
Credit needed
Fair/Good
See rates and fees, terms apply.
Pros
- No annual fee
- No fee charged on purchases made outside the U.S.
- Automatically considered for a higher credit line in as little as 6 months
Cons
- High variable APR
- No rewards program
Bottom line
Making timely payments on all your credit accounts, no matter if it's installment or revolving, is important if you want to be rewarded for having a mix of both. Having both revolving and installment accounts in your name gives you a good variety, shows you can handle multiple loan types and also boosts your credit score. It may not be the biggest factor, but your credit mix counts for 10% of your FICO credit score.
