Your chances of getting a home equity loan can be increased by diversifying your credit portfolio. You can keep your credit utilization low by having different types of credit accounts. It will increase your credit score if you open more than one type. You will also have a better 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
A key part of your overall credit strategy is mixing your credit histories. Lenders love to see a variety 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.
You should have both revolving as well as installment credit. Revolving credit can be easy to manage. You should also try to pay your bills in full each month. Also, you should avoid building up too much debt. Only charge what you are able to pay each month. A personal loan is a good option if you don’t have any installment credit. This will show lenders you are capable of managing different types and credit.
It can help you keep your credit utilization ratio low
Your credit utilization ratio refers to how much credit you use in comparison to your total 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.
Credit score can be negatively affected by a high credit utilization rate. There are several steps you can take to lower it. Limiting the balances on credit cards is a good place to start. You should not have a credit card balance that exceeds 50% of your available credit. This is particularly important if you have multiple credit lines.
Next, avoid making large purchases with your credit cards. Credit card purchases that are large can lead to a higher 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 for those who need to apply to loans in the near future.