Different Types Of Credit Can Boost Your CIBIL Score

Banks utilize your credit score to determine whether or not you have the ability to repay your debts. This is how they determine whether or not you will be able to pay back the money you’ve borrowed from them. Your CIBIL score check is affected by a variety of variables. Your credit mix is only one of several variables to consider. You have a diverse mix of accounts on your credit report if you have a diverse credit mix. Different credit accounts, such as credit cards, home loans, and personal loans, might be included in a credit mix. Keeping your credit utilization ratio below 40% is considerably more crucial for your credit score than having a credit mix that doesn’t pay your obligations on time. Look at how your credit mix influences your CIBIL score:

Revolving credit: 

One of the most prevalent forms of credit accounts, revolving credit is a line of credit from which you may borrow money but which has a limit, known as a credit limit, on how much you can draw at any one time. Credit cards are one of the most common types of revolving credit. In most cases, it entails making monthly payments and paying interest charges if there is a balance owing.

Installment credit:

 Installment credit is a reasonably typical sort of loan that entails taking out a specific sum of money as a loan and repaying it over time according to a predetermined schedule of installments. Personal loans, car loans, and other types of loans are included.

Open credit: 

Opening a line of credit is a more uncommon kind of credit, and for many individuals, it does not show on their credit reports. This context refers to accounts from which you may borrow up to a certain amount, similar to a credit card, but which must be repaid in full each month. Generally speaking, it is related to charge cards and should not be confused with Credit Cards, used for revolving credit.

What is the impact of different types of accounts on your credit score?

While credit variety does impact your credit score, the specific impact it has on your credit score depends on your personal credit history and history of debt. Take, for example, the case when you and your buddy both have the same sort of credit accounts—say, a Credit Card and a Personal Loan—and have had them for the same amount of time. However, if your buddy consistently pays payments on time and you are sometimes late, your credit scores would be very different. With certainty, you will have a worse credit score than your colleague. Even if you and your partner both take out a Personal Loan and include it in your credit mix, the impact on your credit scores will be different.

While having a diverse range of credit accounts and adhering to your repayment schedule will help demonstrate to lenders that you are a responsible borrower, it is important to remember that you should only apply for additional credit accounts if you intend to use the credit rather than to increase your credit score.

What is the best way to apply this to your credit?

The fact that you have a diverse range of credit accounts is beneficial to your credit score, but it is by no means sufficient to preserve or improve your credit score. Instalment loans, for example, are simple to handle, provided you keep to your repayment plan and pay off your obligations every month as instructed. Keep in mind that if you merely pay the minimum amount due each month, you will wind up paying interest on the amount that has not been paid. Over time, your credit card debt will only increase, and you may find yourself in a financial trap before you know it.

Credit utilisation is reduced when the amount of debt you owe to your creditors grows about the total amount of credit accessible to you; this is known as debt accumulation. Your credit usage ratio has a significantly greater impact on your credit score than your credit mix does. This is why you must maintain a close check on your revolving credit accounts at all times. Pay up your credit card bills on time and in full, every time, and you’ll be able to maintain your credit card balances in your account. This will assist you in keeping your credit use low and help you raise your credit score even more.


Your credit score is likely to be excellent if you have a history of appropriately utilising just one form of credit product. Whether it’s a Credit Card or an Education Loan, you have a strong track record of doing so. It is unnecessary to take on more credit if you do not need the additional funds. However, if you want to push your credit score to the next level, you might think about including a new product in your credit mix. For example, if you have a Personal Loan, you may want to consider getting a Credit Card, which will allow you to control your costs better.

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