Your chances of being eligible for a home equity card can be improved by diversifying your credit. A variety of credit accounts can help you keep your credit utilization rate low. It will increase your credit score if you open more than one type. In addition, it will boost your payment history. Here are some tips to diversify credit. You can apply for a home-equity line of credit once you have good credit.
It can increase the chances that you are approved for loan funds
It is important to mix your credit history. Lenders love to see a variety of credit accounts. Your FICO score can be improved by having a mix between old and new accounts. Don't open new accounts just to increase your score. It is better to maintain a healthy amount of credit than to borrow the maximum amount you can afford.
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. Avoid accumulating too many debts by only charging what you can afford each month. You can get a personal loan if you don't have enough 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
Credit utilization ratio measures how much revolving credit you have used compared to credit available on your credit cards. It is usually expressed as a percentage such as 25 percent. You can see that your credit utilization ratio is 50 % if you have $10,000 in credit available on two cards and you only use $500.
If your credit utilization ratio is high, your credit score will suffer. You can reduce your credit utilization ratio by taking several steps. Start by limiting your credit card outstanding balances. First, avoid carrying a balance higher than 50% of your available credit. This is especially important for those with multiple credit lines.
Next, avoid making large purchases with your credit cards. Credit card purchases of large amounts can increase your credit utilization ratio. Pay these debts off as soon and as quickly as possible before they become due. This will avoid you reporting a high credit utilization ratio 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.