Clustering models or cluster analyses have been widely used to explore individual heterogeneity in mental health research. Despite advances in new algorithms and increasing popularity, there is little guidance on model choice, analytical framework and reporting requirements when using clustering models. In this review, we first provided a comprehensive introduction to the philosophy, design and implementation of major algorithms that are particularly relevant in mental health research. The design, comparisons and implementations (in R package) of different models and dissimilarity measures are discussed. The extensions of basic models, such as kernel method, deep learning, semi-supervised clustering, and clustering ensembles were subsequently introduced. Methods for pre-clustering data processing, clustering evaluation and validation, as well as important issues commonly faced in clustering tasks are discussed. Importantly, we provided general guidance on clustering workflow and reporting requirements. A rapid review of publications (December 2020-December 2021) was conducted focusing on the top six psychology and psychiatry journals that published most of the clustering papers. The results have highlighted that there was a lack of diversity in the algorithm of choice, robust validation processes via resampling, and available data and analysis code to improve reproducibility. This comprehensive review offers researchers advanced tools and guidelines to address some of these issues, improve practice and ultimately understanding of the complexity of mental illness.