What is the impact of having multiple types of credit on your credit score?

Having a diverse mix of credit types can positively impact your credit score. This is because credit scoring models, such as those created by FICO and VantageScore, often consider the variety of credit accounts you manage as a sign of your creditworthiness. When you have a good mix of installment loans (like auto or personal loans) and revolving credit (like credit cards), it indicates that you can responsibly handle different forms of debt.

Furthermore, a diverse credit profile demonstrates to lenders that you can manage various financial obligations effectively, which may lead to a higher credit score. This can be beneficial when applying for new credit, as it shows you are not overly reliant on one type of credit. Maintaining multiple types of credit, while ensuring that you manage them responsibly, typically allows you to build a stronger credit history, which is crucial for achieving better lending terms in the future.