Want to boost your credit score? Your credit mix might be the secret

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By credit mix, it implies the type of credit accounts you own, ranging from secured loans such as home or car loans down to unsecured ones like credit cards or personal loans. Lenders and credit bureaus view this as an indication of your ability to manage diversified credit types. A balanced mix of secured and unsecured credit types normally reflects financial maturity and good payback habits.

Why your credit mix matters more than you think

Your credit score is not entirely based upon whether you pay your bills on time. About 10 percent of your score considers your credit mix. If you have only one kind of credit, for example, just a credit card, then it may not give the lender a good enough view as to your financial discipline. In contrast, responsibly handling multiple types of loans reflects your ability to efficiently manage different kinds of financial commitments, and that definitely makes you a less risky borrower.

How to set up a balanced mix without overborrowing

Building a diversified credit profile does not mean taking unwarranted loans; it's all about balancing your needs for borrowing wisely. For instance, if you happen to have a credit card, you introduce variety by taking a small-size personal loan or consumer durable loan. The key is not to borrow more than what you can comfortably repay. A well-rounded credit profile, accompanied by a strong repayment record, can steadily lift your credit score over time.

Repayment consistency still wins

The best credit mix will also not be of any help if the repayment record is poor. On-time payment of EMI and credit card bills is one of the most important aspects of maintaining a robust credit score. Automation of payments or reminders ensures that you never miss due dates. It conveys to the lenders that you are consistent, proving your reliability, which more than anything else improves your creditworthiness.

Use your credit mix to your advantage

When you have an excellent mix of loans and credit cards, pull your credit report to ensure that it is accurate. Never close any old credit accounts without giving it a lot of consideration, as the age of credit is one of the most important factors in determining the overall score. Over time, a well-managed mix of credit will depict financial stability, thus making it easier to get better loan terms, higher credit limits, and lower interest rates.

A good credit mix is not about how much you borrow but how smartly you manage it. By keeping a variety of credit responsibly, you turn your borrowing history into a powerful tool that can give you a stronger and reliable credit score.