Credit Mix Question

[jnw]

I just learned about Credit Mix and how it's 10% of FICO credit report score.  (55 points).  Revolving credit, installment loans & charge cards, etc..

I didn't realize one needed different types of credit to have a higher score.  I have had a mortgage loan for over 10 years now so it must be helping my credit quite a bit.  I have 5 revolving credit cards now.

Another type of credit line is a "charge card" which I guess would be something like American Express?  I don't have an American Express card yet, so if I got one would it improve my credit score?  I guess it isn't considered revolving credit.

Btw, I had a Wells Fargo American Express Propel card, which was revolving credit, so I guess there are different types of American Express cards.  Also, I don't know if the $200 sign up bonus I got with that card counted towards the "once in a lifetime" bonus AE gives you -- does this bonus only apply to "charge cards" ?

I'll have my mortgage paid off in 10 years (because I was paying large payments).  I was going to fast pay it, but now I don't know if I want to fully pay it down. Can I pay like 80% of the remaining balance and get it re-ammortized for 30 years without resetting the loan rate, age or the original loan amount?   Would be nice to pay $25 per month for say 30 years on a tiny amount to keep that loan in the credit mix.

I guess somehow utility bills can be added as well to help get more Credit Mix points?  Experian has something called "Experian Boost" but don't know how it works or how effective it is.   I've always been on time with all 5 of my utility bills.

[Telecaster]

Take a step back.  What is your question, what is your problem, and what is your goal?

[jnw]

Take a step back.  What is your question, what is your problem, and what is your goal?

I clearly explained it all in the post.  I want to improve & preserve my credit score obviously -- by improving/preserving my credit mix which amounts to 10% (or 55 points) of the FICO score.  I just re-read my post and every single question I asked is related to this and every question makes sense.

Do you even know about the Credit Mix (10%) portion of the FICO score? I didn't know about it for years churning credit cards. Just learned about it this evening. You need installment loans, charge cards in addition to revolving credit to get the best score it seems.  There is a difference between a "charge card" and a "credit card", but I've never had a "charge card" (e.g. American Express Gold). If I can find a "charge card" with no annual fee, it'd probably be nice to have one just to improve my credit score by diversifying my "credit mix".   I really dread paying a $250 annual fee for American Express Gold -- and I don't even know if I'd get the nice welcome bonus for this card since I've had AE revolving credit cards in the past which gave me a welcome bonus: e.g. Wells Fargo Proper AE card.

[NotJen]

Btw, I had a Wells Fargo American Express Propel card, which was revolving credit, so I guess there are different types of American Express cards.  Also, I don't know if the $200 sign up bonus I got with that card counted towards the "once in a lifetime" bonus AE gives you -- does this bonus only apply to "charge cards" ?

The once-in-a-lifetime bonus applies separately to EACH American Express Card.  Also, once-in-a-lifetime is rumored to actually be 7 years, but I have not tested that yet.

The Wells Fargo Propel card counts as a Wells Fargo card, not an American Express Card (it just happens to "run" on the Amex network, it's not issued by Amex).

There used to be opportunities for no-annual-fee charge cards, but I have not seen any for at least the last 5 years.

I don't currently have any charge cards, and have not had an installment loan in 10 years.  My credit score is still usually over 800.  So, no, I don't care about the "Credit Mix" at all.

[Runrooster]

I don't currently have any charge cards, and have not had an installment loan in 10 years.  My credit score is still usually over 800.  So, no, I don't care about the "Credit Mix" at all.

Ditto.

I think what Telecaster is pointing out is that a 55 point raise in your credit score (if one Amex could do that) is worth far less than $250 to you?  A good score is helpful when you’re getting a mortgage or car loan or other loans. Are you in the market for these? Then stop micromanaging your credit score.

[Tigerpine]

According to the credit card websites, I've actually had an 850 score and am currently hovering at about 840.

I've had the following types of debt within the past seven years.

Mortgage
Student Loans (Paid off)
Credit Card (In the sense that I have a balance at the close date that I quickly pay.)
Charge (Only if AMEX Blue Cash Everyday Card counts; same condition as CC)

But truthfully, if your score is 800+, you've probably squeezed all the utility you will from your credit score.  Just keep up the good work to maintain your score.  According to the link below, anything over a 740 is pretty much treated the same. 

https://credit.org/blog/what-is-a-good-credit-score-infographic/

[jnw]

Btw, I had a Wells Fargo American Express Propel card, which was revolving credit, so I guess there are different types of American Express cards.  Also, I don't know if the $200 sign up bonus I got with that card counted towards the "once in a lifetime" bonus AE gives you -- does this bonus only apply to "charge cards" ?

The once-in-a-lifetime bonus applies separately to EACH American Express Card.  Also, once-in-a-lifetime is rumored to actually be 7 years, but I have not tested that yet.

The Wells Fargo Propel card counts as a Wells Fargo card, not an American Express Card (it just happens to "run" on the Amex network, it's not issued by Amex).

There used to be opportunities for no-annual-fee charge cards, but I have not seen any for at least the last 5 years.

I don't currently have any charge cards, and have not had an installment loan in 10 years.  My credit score is still usually over 800.  So, no, I don't care about the "Credit Mix" at all.

Very nice score!

I didn't know that about American Express, I think I was given bad advice from a few people who were saying you must be careful which AE card you choose because it's a "once per lifetime" offer.   Didn't realize it was per card.

I think I was also perhaps given bad advice regarding the importance of installment loans in the "credit mix" part of FICO score.  I watched several different people on youtube say the same thing: a lot of people who pay off installment loans , like mortgage etc., instantly lose like 30 points off their credit score due to lack of diversity in credit mix.  They even suggest getting a small secured loan with your credit union or whatever, to have an installment loan back on your credit report to improve diversity.    Then someone also said that a "charge card" also helps diversify as well, in addition to revolving credit.

Are all the detailed formulas available for calculating the FICO score?  Seems like these credit report agencies should be legally required how all this stuff is calculated since they are controlling peoples' lives with their scores.  The federal government should demand this. Also why aren't children taught in high school or earlier about how credit scores are calculated?  I wish I knew what I know now back when I got my first credit card.  I certainly wasn't taught any of this by my parents or grandparents.

[jnw]

I don't currently have any charge cards, and have not had an installment loan in 10 years.  My credit score is still usually over 800.  So, no, I don't care about the "Credit Mix" at all.

Ditto.

I think what Telecaster is pointing out is that a 55 point raise in your credit score (if one Amex could do that) is worth far less than $250 to you?  A good score is helpful when you’re getting a mortgage or car loan or other loans. Are you in the market for these? Then stop micromanaging your credit score.

I want the best score possible because I am churning credit cards for sign up bonuses.  Maybe there is a "charge card" without an annual fee?  Maybe it doesn't have to be American Express.

My current credit scores are 792 FICO with Experian web site, 774 with Equifax and 786 with TransUnion if I recall -- both of these scores I got via Credit Karma.   This is with a 10 year old installment loan (mortgage) and 5 revolving credit cards.  Average credit age is 6.5 years.  No late payments nor derogs.  6 hard inquires on Equifax, 4 on Transunion.

Also why isn't the federal government requiring these credit bureaus to make it so individuals can access their credit report at any time at no charge? (Not just once per year.) Makes no sense. These credit bureaus are controlling people's lives.. even affecting homeowner's insurance and auto insurance rates.

[lhamo]

Some states (Washington is one) are making it illegal for insurance companies to use credit scores as a factor in determining rates -- issues of historical bias/discrimination where low credit scores tend to be more prevalent in certain less privileged populations.

We do not have a mortgage and have not for 20 years.  We did take out a car loan in 2015 in order to get a discounted price from the dealership (saved 2k) but paid it off the first month.  The only other stuff we have on our credit report are credit cards, of which we have several but only actively use 3-4 (a couple of joint ones for household purchases and some personal ones for personal expenses).  Our credit score is typically in the low 800s.  When it does dip into the higher 700s it is almost always correlated with a large purchase or charge that raises our credit utilization ratio.  For example, SO bought a new car last spring and put the downpayment of several thousand dollars on our Costco visa -- our credit score dropped the following month from 810ish to low 800s. 

Re:  accessing credit reports, if you have been the victim of a data leak you can usually get credit report monitoring free for several years.  Same with documented identity theft.  Not something you want to happen but when it does it can get you access.

I would also suggest that you not waste too much time (and no money) on figuring out how to track/boost your credit score given your situation.  We have virtually no on paper income and I still get credit card offers all the time, including ones with good bonuses.  When I do decide to apply for them, I always list our rough actual reported income (roughly 20-25k/year, almost all Roth conversions) and so far I have not been turned down. 

[Catbert]

With a FICO Score in the high-700s there's really no reason for you to fret.  Since you churn credit cards the biggest "ding" on your credit score is likely "too many cards with a balance" and "too many recent cards."  At least that's why my score is less than perfect although firmly above 800. When you get your FICO score what reason is given for being less than perfect?

The biggest difference between us is likely:  length of credit history (mine's 38 years) and percentage of credit limit used (mine's 3% most months).

Edited to add:  Although I don't think of an "Amex charge card" as an installment loan I don't know how FICO considers it.  The last "installment loan" (i.e., car loan) I had was when I bought a 1985 RX-7 as a new car. 

[jnw]

With a FICO Score in the high-700s there's really no reason for you to fret.  Since you churn credit cards the biggest "ding" on your credit score is likely "too many cards with a balance" and "too many recent cards."  At least that's why my score is less than perfect although firmly above 800. When you get your FICO score what reason is given for being less than perfect?

Regarding "too many recent cards" does that simply equate to the hard inquiries? Or do they look at all the recent accounts actually opened?   The number of recent accounts opened is not part of credit score right? Just the hard inquiries?

Although I don't think of an "Amex charge card" as an installment loan I don't know how FICO considers it.  The last "installment loan" (i.e., car loan) I had was when I bought a 1985 RX-7 as a new car.

Here's one person who discusses Credit Mix on youtube.  She explains the diversity of credit: revolving, installment loans, charge cards, utilities etc..  It's a bookmarked link so no time is waisted watching the video trying to find what I am talking about:

https://youtu.be/qWXlbbmledg?t=414

[Telecaster]

Take a step back.  What is your question, what is your problem, and what is your goal?

I clearly explained it all in the post.  I want to improve & preserve my credit score obviously -- by improving/preserving my credit mix which amounts to 10% (or 55 points) of the FICO score.  I just re-read my post and every single question I asked is related to this and every question makes sense.

The reason I asked is that you didn't provide enough information to for us to help you formulate a winning strategy.   For example, bad credit can be improved by a lot relatively quickly.  But it is hard to move the needle much if you have good credit.  And there are different things you need to do in each case.   So knowing your credit score even roughly is key to making a plan (I see you provided that later).   

Another thing you didn't provide is your timeline.   This is important because while you could open personal line of credit with your bank which would improve your credit mix, you would also have an inquiry on your credit report, which can cause your credit score to go DOWN.  So if you want a loan in a year maybe yes, but next month no.   

But now you've shared your FICO and rough goals we can figure a few things out.  One is that your FICA is high enough that it will be hard to move the needle very much no matter what you do.  But the good news is that it is sufficiently high that you should qualify for most all offers. 

IMO, American Express cards are great, IF you travel a lot.  You didn't share with us if travel was in your plans or not, but unless it is I wouldn't bother with Amex.   I certainly wouldn't get one just in hopes of raising my credit score.   And if your plans change in the future you may wish you get the bonus at that time.  And again, there will be a credit inquiry which you probably don't want if just raising your score is your goal.  Also keep in mind that too many recent inquiries is also a negative.   If your goal is to churn you don't want excess cards. 

Another thing to keep in mind is that counter-intuitively you can be denied if you have too much available credit.  Banks want you to use their card and too much available credit is a contrary indicator.   So again, that American Express card might not be helping you.

Finally, most credit card companies give you free credit reports and have simulators on their websites so you can see the effect of canceling or open a card.   

[Telecaster]

Regarding "too many recent cards" does that simply equate to the hard inquiries? Or do they look at all the recent accounts actually opened?   The number of recent accounts opened is not part of credit score right? Just the hard inquiries?

It is both. 

[jnw]

Thanks for all the replies.

I am wondering if I called American Express each year, I might be able to get them to waive the annual fee or give me some promotion to offset the $250.  I figure a few calls and I might get lucky with the right person I dunno -- I'm kind of persistent and don't mind wasting time on the phone lol.  I've seen others call them live on youtube and get an AE Platinum $595 annual fee waived.

I know I'd be good with this card for the first year, since I could potentially get 90K points (minimum of 75k points).

I am just curious how much it could improve the score by having it in the credit mix since it is a charge card not a credit card.   Perhaps it might not make that much of a difference.

It'd be fun when we go out to dinner, on our birthdays, at the $50 per plate restaurant, to break out the AE Gold card -- OMG aren't we fancy lol -- giving the waiter a nice 20% tip... when in reality we are super low income and very frugal lol.  But I'd only keep the card if I could always get away from paying an annual fee after the first year.

[NotJen]

I am wondering if I called American Express each year, I might be able to get them to waive the annual fee or give me some promotion to offset the $250.  I figure a few calls and I might get lucky with the right person I dunno -- I'm kind of persistent and don't mind wasting time on the phone lol.  I've seen others call them live on youtube and get an AE Platinum $595 annual fee waived.

Usually you have to pay at least 1 annual fee before you'll get an offer to completely waive it.  I also think the fee waivers are often for less than the full annual fee, and/or require additional minimum spends.  You certainly won't be able to waive it every year.

I know I'd be good with this card for the first year, since I could potentially get 90K points (minimum of 75k points).

Do you have a plan for how you would use these points?  They are most valuable when redeemed for airfare booked through Amex (1 cent per point).  If you cash them in for statement credits, you only get 0.6 cents per point.

[jnw]

Do you have a plan for how you would use these points?  They are most valuable when redeemed for airfare booked through Amex (1 cent per point).  If you cash them in for statement credits, you only get 0.6 cents per point.

Yeah I was thinking for my BF's annual visit to see his mother.. would be nice if he could get like three free round trip flights with 90k points.. maybe 2 round trips.

But going to go with a Barclays AAdvantage card next I think, instead.  That will get him 2 round trips.  50k miles and first year of annual fee is waived.  Then I could downgrade card before annual fee hits.  There is no spend requirement, just a single purchase, to get the 50k miles points.   I want to season a Barclays card ultimately for piggybacking perhaps -- I heard they are great for this.

The American Express card is probably not worth it.  Do you know of any charge cards without an annual fee?  I don't see why they have to charge an annual fee when they make money for each spend transaction.  I wish AE had a charge card with very little rewards points and no annual fee.. just to have a charge card for credit mix diversity.

[jnw]

I wonder if my credit union mortgage lender would look at me funny if I paid down the balance to $1000 then asked to recast that $1000 over 30 years lol.   Would be like $5 per month payments, $4 per month in interest.  So for $4 per month, I'd have the diversity of an installment loan for 30 years.

[Catbert]

I'm still unclear on why you are so focused on getting a charge card.  When you get your FICO score (free with a lot of bank credit cards) does it say that your lack of a charge card is impacting your credit score?  Are you sure that a charge card is even an installment loan for FICO purposes?  To my understanding installment loans are things like student loans, car loans, and mortgages where you make a standard payment over a set period of time.  Charge cards are the opposite of that - the entire balance is due each month.

I suggest that you spend some time on Doctor of Credit.  The youtubers you're watching seem...sketchy (to me).  Doctor of Credit is an established and well-known.

https://www.doctorofcredit.com/credit-reports-scoring-reference-pages/

[jnw]

I'm still unclear on why you are so focused on getting a charge card.  When you get your FICO score (free with a lot of bank credit cards) does it say that your lack of a charge card is impacting your credit score?  Are you sure that a charge card is even an installment loan for FICO purposes?  To my understanding installment loans are things like student loans, car loans, and mortgages where you make a standard payment over a set period of time.  Charge cards are the opposite of that - the entire balance is due each month.

I suggest that you spend some time on Doctor of Credit.  The youtubers you're watching seem...sketchy (to me).  Doctor of Credit is an established and well-known.

https://www.doctorofcredit.com/credit-reports-scoring-reference-pages/

Do you know if there are formulas shared with the public how credit scores are calculated? I'd like to see the formulas, including the 10% "credit mix" formula.

I found out my credit union will recast my mortgage loan for me for free the first time.   I just asked them if I could fast pay it down to a $1000 remaining balance and recast that $1000 for 30 years at $5 per month payment.   That way I can keep that installment loan on my credit report for the rest of my life.. I'm over 50 and dont' expect to live after 80.

[Telecaster]

The exact formulas are proprietary.   Otherwise no one would need FICO.   But be aware that many banks use scoring systems similar to, but not exactly the same as FICO.   So even knowing the formulas might not be of much benefit, depending on the card you are applying for. 

Keep in mind that one benefit score-wise of opening a credit card is that it increases your available credit.   However, charge cards don't affect your credit utilization, so there is no benefit in that regard.   

[jnw]

According to a couple folks in the following forum post, they don't believe an American Express charge card helps at all in the Credit Mix:

https://ficoforums.myfico.com/t5/General-Credit-Topics/Charge-cards-and-credit-mix/td-p/5816933

Btw, I spoke with my credit union and they are willing to recast the loan for just over 20 years (been paying a 30 year loan for about 10 years now), after I pay down the balance to even as low as $1000 -- they do it free of charge the first time.  So the mortgage payment would be like $6.34 per month or so for 20 years. I still need to ask them if the original loan amount (near $100k) will be shown on the credit report or if it changes it to $1,000 on the credit report when they recast it.  I think I read it's better to have a lower balance on installment loan -- it improves the score, similar to utilization on revolving credit card accounts.  So $1000 owed on a $100k loan for 20 years, ought to boost credit mix nicely perhaps.  (This is just an idea I had, don't know if it will work the way I want it to.)

[Michael in ABQ]

I haven't had an installment loan in 5-6 years and my score is still 800+. At one point I had a personal loan, some student loans, and a car loan. All those are long since paid off so now my accounts are solely credit cards (about 10 total?).

I think having a history of paid off loans probably helps vs. if I had never had an installment loan my whole life and just had credit cards.

In the end, once you get above 750-775 it's pretty meaningless.

[kenner]

According to a couple folks in the following forum post, they don't believe an American Express charge card helps at all in the Credit Mix:

https://ficoforums.myfico.com/t5/General-Credit-Topics/Charge-cards-and-credit-mix/td-p/5816933

Pretty sure I'm just repeating what's already been said, but once your credit score is very good/excellent (depends on scale, but generally mid-700s), this is kind of a pointless game to play.  What's more likely to cause an issue in your credit churning plans is trying to open too many cards/too many lines of credit in too short a time because no one is going to care if you're just doing it in search of your 'perfect' mix.  I can tell you that I'm north of 800 with no installment loans at all, and the biggest thing that gets flagged by whichever credit card reports a score every month isn't credit mix, it's credit age, mostly since I open 1-2 new cards a year and keep maybe 1 in 4 of them so age averages out to ~6 years despite the oldest line of credit being several times that.  And even with such 'young' credit my score only drops a few points each time (and goes back up after a couple months) since the biggest thing they're paying attention to are on-time payments (kind of goes without saying, but don't screw this one up) and credit utilization.