Your chances of getting a home equity loan can be increased by diversifying your credit portfolio. Different types of credit accounts can help maintain a low credit utilization. Your credit score will rise if you have more than one type. This will increase your payment history. Read on for tips on how to diversify your credit. Once your credit is in order, you can begin applying for a home equity loan.
It can increase your chances of getting approved for a loan
The key to your overall credit strategy is to combine your credit history. Lenders prefer to see a range of credit accounts. Your FICO score will be higher if you have both old and new accounts. However, don't get carried away with opening new accounts for the sake of boosting your score. It is better to maintain a healthy amount of credit than to borrow the maximum amount you can afford.
Ideal is to have both revolving or installment credit. Revolving credit is easy to manage and you should try paying off your bills on time each month. Avoid accumulating too many debts by only charging what you can afford each month. A small personal loan can be obtained if you don’t currently have any installment debt. This will demonstrate to lenders that you are capable of handling different types credit.
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. This ratio is usually expressed in percentages, such as 25%. If you have $10,000 on two cards but only $500, your credit utilization ratio would be 50 percent.
High credit utilization will affect your credit score. You can reduce your credit utilization ratio by taking several steps. You can start by limiting the amount of outstanding balances on your credit cards. Keep your credit card balances below 50%. This is especially true if you have multiple lines.
The next step is to avoid large purchases made with credit cards. Your credit utilization ratio can be increased by making large credit card purchases. It is important to repay these debts promptly, so they don't become due. This will ensure that you don't report a high utilization percentage to the credit bureaus. This is especially important if you need to apply for a loan in the near future and want to maintain the highest possible score.