When applying for a loan, most borrowers focus on credit score and income eligibility. But another key factor lenders consider is your credit mix — the variety of credit accounts you hold.
1. What Is Credit Mix?
Credit mix refers to the types of credit accounts in your name, typically including:
Secured Loans (e.g., home loan, car loan)
Unsecured Loans (e.g., personal loan, credit card)
A healthy credit profile usually has a balance of both, showing lenders you can handle different forms of debt responsibly.
2. Why Lenders Care About Credit Mix
Risk Assessment: A borrower who has managed both secured and unsecured loans is seen as less risky.
Financial Discipline: A diverse credit history indicates good repayment habits.
Predictive Indicator: Past responsible handling of different loans signals ability to manage new debt.
3. Impact on Credit Score
Credit bureaus like CIBIL and Experian assign weightage to credit mix. While it’s not the top factor, it can tip the scale in borderline cases where your eligibility is close to the lender’s threshold.
4. Example Scenarios
Positive Example: A borrower with a home loan, a car loan, and a credit card (all paid on time) is seen as reliable.
Negative Example: A borrower with only multiple credit cards and no secured loan history may be perceived as higher risk.
5. Tips to Improve Credit Mix
Avoid relying only on unsecured loans.
Take small secured loans (like a two-wheeler loan) and repay them on time.
Keep credit card utilization low and pay in full each month.
Don’t take unnecessary loans just to diversify — it should align with your needs.
FAQs
Q1: How much does credit mix affect my loan approval?
A1: It’s a moderate factor, but can be decisive if your credit score is borderline.
Q2: Can I get a loan with only unsecured credit history?
A2: Yes, but lenders may offer a lower amount or higher interest rate.
Q3: Does closing old loans hurt my credit mix?
A3: It can slightly reduce the variety in your credit profile, but timely closures also show responsibility.
Q4: Is it worth taking a small secured loan to improve my credit mix?
A4: Yes, if it aligns with your financial needs and repayment ability.
Published on : 11th August
Published by : SMITA
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