Diversifying credit can improve your chances of being approved for a home equity line. Having different kinds of credit accounts can also help you maintain a low credit utilization ratio. You can improve your credit score by having more than one type. In addition, it will boost your payment history. For more information on diversifying credit, read on. Once you have a good credit mix, you can start applying for a home equity line of credit.
It can increase the chances that you are approved for loan funds
Mixing your credit history is an important part of your overall credit strategy. Lenders like to see a wide range of credit accounts. Your FICO score will be higher if you have both old and new accounts. Don't open new accounts just to increase your score. It's better not to open new accounts for every type of credit, and to keep your credit score balanced.
You should have both revolving as well as installment credit. It is simple to manage your revolving credit and you should make sure that you pay all of your bills on the due date. It is important to not accumulate too much debt. You should only charge what you can pay each month. Try to obtain a small personal loan if your credit history doesn't include installment credit. This will demonstrate lenders that you are capable and able to manage different credit types.
It can help you keep your credit utilization ratio low
Credit utilization ratio measures how much revolving credit you have used compared to credit available on your credit cards. It is often expressed as a percentage, such as 25 percent. Example: If you have $10,000 and only 500 of it on two credit cards, your credit utilization rate is 50%.
Your credit score will be affected if your credit utilization ratio exceeds 30%. There are several things you can do to lower it. Start by limiting your credit card outstanding balances. To begin with, you should avoid having a balance greater than 50% of your available credit. This is especially important for those with multiple credit lines.
Avoid making large credit card purchases. Large purchases made on credit cards can increase credit utilization. Try to pay off these debts as soon as possible, before they fall due. This will avoid you reporting a high credit utilization ratio to the credit bureaus. This is especially important in case you are applying for a loan within the next few months and need to maintain a high score.