FICO Scoring System 5 – Variety of Credit

Not Equal

There are many types of credit and FICO does not treat them all equally. This amounts to the final 10% of your credit score, so choose your credit with caution.

Good Credit

The best credit to have for building a credit history is a mainstream credit card such as American Express, Visa, MasterCard, and Discover.

Bad Credit

FICO is not a fan of consumer credit cards like clothing and furniture store cards. It is definitely not a good idea to finance these purchases on a payment plan. Doing so sends a message to lenders that you are impulsive and spend more than you earn. This type of credit could negatively impact your FICO scores faster than a mainstream credit card.

Variety of Accounts

It is a good idea to have a variety of good credit. Having revolving credit like credit cards can enable you to achieve great credit, but mixing it up can provide an opportunity for even better credit. Adding an installment loan to your credit report can help take your score to the next level. The new account rule still matters, so you will need a good credit history on an installment loan, such as mortgage or auto loans, before it will benefit your score.