TYPES OF CREDIT – 10%

This 10% of your score is made up of criteria where almost nobody has a correct idea on what to do. If you have ever heard those incorrect statements such as: You should have at least three credit cards. American Express is a great revolving account. Or my favorite, you should have a 1 to 1 ratio between revolving and installment accounts (this would mean my sister, who at one point had every store card known to mankind would need to buy up half the real-estate in town to keep up her calculation requirements), this section is for you.

The best score is certainly not about quantity but rather quality. Ideally, you want to have one account of every category. I’m not just talking about Revolving, Installment and Other either. Installment accounts can be broken down further than that. A close to perfect mix is going to be a credit card (R), an automobile loan (Auto), a mortgage loan (Mtg), a student loan (I), and an “other loan” like American Express (O). American Express that has no limit and is considered an “Other” account, not revolving as one might assume, as it has no limit to calculate its utilization.

The reasoning behind all this is to show you can carry a variety of loans (shows responsibility) but not too much of any one kind (too much risk). This doesn’t mean start opening and closing your loans left and right to try to get this mixture correct. If you do all the other sections are going to be impacted just as much, which could be good or very bad. However, to receive guidance, you certainly may send your situation our way to for a full free credit analysis at 1-866-595-6313.

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