Your chances of being eligible for a home equity card can be improved by diversifying your credit. Diversifying your credit accounts can help to maintain a low rate of credit utilization. You can improve your credit score by having more than one type. This will increase your payment history. Continue reading for more tips on diversifying your credit. Once your credit is in order, you can begin applying for a home equity loan.
It can increase your chances to be approved for a mortgage loan
Mixing your credit history is an important part of your overall credit strategy. Lenders appreciate a diverse range of credit accounts. Your FICO score will improve if you have a mixture of old and new accounts. Do not get too excited about opening new accounts to boost your score. It is better to have a healthy mix of credit types than to take out loans that you cannot afford to repay in full.
In ideal situations, you will have both revolving credit and installment credit. Revolving credit is easy to manage and you should try paying off your bills on time each month. It is important to not accumulate too much debt. You should only charge what you can pay each month. A small personal loan can be obtained if you don’t currently have any installment debt. This will show lenders that you can handle different types of 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. It is often expressed as a percentage, such as 25 percent. 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. There are several things you can do to lower it. Begin by reducing the outstanding credit card 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.
Keep your credit cards from making large 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 allow you to avoid reporting high utilization rates to 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.