The various types of credit

The various types of creditMultiple factors of your credit history are considered in the determination of your credit score, with 10 percent taking into account the varying types of credit that you hold. Having a good mix of credit can significantly improve your credit score.

There are four areas in which your accounts are judged. The highest-rated type of credit is for real estate – loans taken out for home purchases (mortgages) or refinancing – which is given four stars. Ranking third is the number of accounts you hold with installment credit, where the borrower pays a fixed amount every month, such as furniture, appliance or car loans. Major credit cards are given two stars, including Visa, Mastercard, American Express and Discover, while the lowest-ranked form of credit is the retail card.

Having a variety of credit, especially two major credit card accounts, signifies to lenders that you are responsible with credit, making them more likely to issue you a loan in the future. It is important to keep a good financial standing in order to get the best interest rates on various forms of credit in the future.