Does having multiple credit cards contribute to "credit mix"?

Question

Right now, the only credit account I have is one credit card, which I've had for about two years. If you don't count as debt the couple hundred dollars I put on that card and pay off in full each month, then I'm completely debt free. I finished paying a small student loan immediately after I graduated, and I don't have a mortgage, car payment, or any other type of debt.

I plan to stay debt free, but I appreciate the non-debt-related advantages of having a good credit score. Here are a few advantages from an answer that @JohnFx posted to this question:

• Insurance companies are factoring them into their calculations regarding how likely you are to make a claim.
• An especially bad credit score can hurt your chances of getting a Government security clearance.
• Employers can use negative information on your credit report to make hiring, firing and promotion decisions (except for bankruptcies).
• Landlords may use them to decide whether to rent to you, and how much deposit to charge.
• Cell phone providers use them to decide what payment plans you can get.
• Utility companies sometimes use them to decide how much deposit you need to pay.

My credit score is fairly high—it drifts between 740 and 760 each month, but I would like to have it consistently above 760. My understanding is that anything beyond that is icing on the cake, but doesn't make a big difference.

For reference, per the FICO website, the five score criteria are:

• (35%) Payment History
• (30%) Amounts Owed (utilization)
• (15%) Length of Credit History
• (10%) Credit Mix in Use
• (10%) New credit

My utilization is good. It's about 5% each month. However, one of the limiting factors of my score is account age (understandable as I don't have extensive credit history). Another limiting factor is lack of recent loan installment information. Both of those factors are coming from FICO each month. But I think credit mix might also be hurting me because I only have one account right now. I have two questions then:

1. Would opening a second credit card contribute in any meaningful way to my credit mix or no, since it's the same type of credit?

2. If yes to (1), is it worth it to take the hit to my average account age sooner rather than later by opening a new credit card?

As a final note, while I understand the risks of credit cards, I'm very disciplined and self-controlled when it comes to money. If I open another account, I'll simply split what I spend now across both cards—my overall spending would not increase. If anything, my utilization in proportion to my total credit would go down.

Answer 1

Would opening a second credit card contribute in any meaningful way to my credit mix or no, since it's the same type of credit?

Yes, multiple lines of credit help your credit score, even if they are all credit cards. There are experts on both sides of this argument though. For example, Fico says that you shouldn't open a new credit card just for the credit boost, while NerdWallet cautiously recommends it. My recommendation is that if you're disciplined with your credit spending, it will help a little.

If yes, is it worth it to take the hit to my average account age sooner rather than later by opening a new credit card?

If you want to build up your number of credit lines, do so well before you need to use your credit to take out a loan. Not only will your credit score take a hit from the average age dropping, but you'll also have a hard pull on your credit report.

As Fixed Point points out, though, you will see a larger improvement to your credit score by adding another type of credit, such as a home loan, to your credit mix. If you are already limited your credit utilization to 10%-30% then you probably won't be able to reach your goal by just adding a credit card.

Answer 2

I plan to stay debt free, but I appreciate the non-debt-related advantages of having a good credit score.

If you plan to stay debt-free, then opening up more cards will not significantly change your credit score. You seem to want to be going from a good score to a great score, which adding cards alone will not do.

Also, I highly doubt it will significantly affect any of the five things you mention. If you had a bad credit score, then I could see some effect on renting an apartment, getting a job (where trust with money is a component of the job), etc., but don't try to game the system for some number. You won't magically get cheaper cell phone rates, lower insurance premiums, etc.

Answer 3

Short-term it will not help, it will actually hurt your credit score. Long-term, it will help for a couple of reasons:

• You will probably have a higher credit limit among multiple cards. If you are paying all of your balances each month, the current balance will still show up if it is not paid on the day that your credit card company reports to the credit agencies. Having a higher collective limit will show a smaller ratio of used to available credit.
• Some of your score is based on average age. (This is why in the short-term it hurts, but in the long-term it can help). If you have two open accounts that are each 10 years old, then opening a third account when you sign a mortgage only takes the average age down to ~7 years instead of ~5 years if you only had one old account. This only helps if you plan to keep this card account open perpetually.

The mix that others refer to is mortgage and auto loans which do not count as revolving credit. A mortgage will help more than a credit card in this case, but may not make sense in your circumstances.