There are several factors that affect credit health. A credit report includes a historical account of payment history and current debt. A credit score is calculated using points from these two categories. The total picture of credit health also includes other data like mix of accounts, age of debt and accounts, in addition to the factors already mentioned.
The types of accounts that impact a credit report include revolving, installment, and open accounts. Revolving accounts are accounts that have an ongoing monthly balance. The balance changes monthly and the payment amount changes in relation to the outstanding balance. Primarily, the accounts that will be labeled as revolving are credits cards or lines of credit. Installment accounts include loans or debt that has a fixed repayment period and a monthly amount due toward the debt. Many types of loans and debt fall into this category. For example, auto loans, home loans, and student loans. Open accounts are similar to lines of credit but are consider open because they are somewhere between a revolving and installment account. The majority of these accounts have variable billing but no distinct credit limit. Examples of this type of account would be a mobile phone or a utility bill.
Account Mix and Credit Score
Any account that you have that falls into one of these categories will be reported on your credit report. A mixture of account types is an important part of how the scores are calculated. Credit reporting agencies use the mixture of accounts in a credit file to generate statistics. Those figures are used to determine risk tables. Risk assessments regarding how you will manage your credit will result in a score that is yielded from how you manage your credit and the number accounts you have open and closed and the types account mix included in the report.
Before your rush to change your account mix or makes, changes to your financial outlay, begin by checking your credit score. If you find that yours are missing a certain type of account, then weigh your options. Determine if it is prudent to open new credit account to raise your score if you are not in the market to make any large purchases in the near future.