Diversifying your credit mix can increase your chances of qualifying for a home equity line of credit. A variety of credit accounts can help you keep your credit utilization rate low. A variety of accounts can help raise your credit score. In addition, you will have a better track record in terms of your payments. Here are some tips to diversify credit. Once you have a strong credit history, you are eligible to apply for a line of home equity credit.
It can increase your chances to be approved for a mortgage loan
It is important to mix your credit history. Lenders love to see a variety 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.
Ideally, you'll have both revolving and installment credit. Revolving credit is easy to manage and you should try paying off your bills on time each month. Also, you should avoid building up too much debt. Only charge what you are able to pay each month. You can get a personal loan if you don't have enough installment credit. This will demonstrate to lenders that you are capable of handling different types credit.
It can help you keep your credit utilization ratio low
Your credit utilization ratio is a measurement of the amount of revolving credit you use compared to the total available credit on your credit cards. It is often 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.
If your credit utilization ratio is high, your credit score will suffer. There are many steps you can take in order to reduce it. Start by limiting your credit card outstanding balances. To begin with, you should avoid having a balance greater than 50% of your available credit. This is especially important if your credit cards have multiple lines.
Keep your credit cards from making large purchases. Credit card purchases of large amounts can increase your credit utilization ratio. It is important to repay these debts promptly, so they don't become due. This will prevent you from reporting a high utilization rate 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.