Diversifying credit can improve your chances of being approved for a home equity line. 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. In addition, you will have a better track record in terms of your payments. You can find out more about diversifying your credit here. You can apply for a home-equity line of credit once you have good credit.
It can increase your chance of getting approved to borrow money
Your overall credit strategy should include mixing your credit history. Lenders appreciate a diverse 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.
Ideally, you'll have both revolving and installment credit. Revolving credit can be easy to manage. You should also try to pay your bills in full each month. 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
Your credit utilization rate is a measure of how much revolving debt you use relative to total credit on your cards. It is usually 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 scores will decline if you have a high credit utilization ratio. You can reduce your credit utilization ratio by taking several steps. To begin, reduce the amount of credit card debt. Keep your credit card balances below 50%. This is especially important if your credit cards have multiple lines.
The next step is to avoid large purchases made with credit cards. Credit card purchases of large amounts can increase your credit utilization ratio. These debts should be paid off as soon as possible to avoid falling 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.