Your chances of getting a home equity loan can be increased by diversifying your credit portfolio. A variety of credit accounts can help you keep your credit utilization rate low. Adding more than one type of account will help you raise your credit score. You will also have a better payment history. Continue reading for more tips on diversifying your credit. You can apply for a home-equity line of credit once you have good credit.
This can improve your chances of being approved for a loan.
Mixing your credit history is an important part of your overall credit strategy. Lenders want to see a broad 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 to maintain a healthy balance of different types of credit and not take out loans you can't afford to pay off in full.
In ideal situations, you will have both revolving credit and installment credit. You can manage revolving credit easily and should pay your bills on time each monthly. It is important to not accumulate too much debt. You should only charge what you can pay each month. If you don't have any installment credit, try to get a small personal loan. This will prove to lenders that your ability to handle various types of credit.
It can help you keep your credit utilization ratio low
Your credit utilization rate is a measure of how much revolving debt you use relative to total credit on your cards. This ratio is usually expressed in percentages, such as 25%. For example, if you have $10,000 available on two cards, but you are only using $500 of it, your credit utilization ratio is 50 percent.
Your credit score will be affected if your credit utilization ratio exceeds 30%. There are several ways to lower your credit utilization ratio. To begin, reduce the amount of credit card debt. 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.
The next step is to avoid large purchases made with credit cards. Making large purchases on credit cards can increase your credit utilization ratio. Try to pay off these debts as soon as possible, before they fall due. This will help you avoid reporting a high 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.