Your chances of being eligible for a home equity card can be improved by diversifying your credit. Having different kinds of credit accounts can also help you maintain a low credit utilization ratio. A variety of accounts can help raise your credit score. This will increase your payment history. Read on for tips on how to diversify your credit. Once you have a good credit mix, you can start applying for a home equity line of credit.
It can increase your chance of getting approved to borrow money
Your overall credit strategy should include mixing your credit history. Lenders prefer to see a 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.
It's ideal to have both installment and revolving credit. You can manage revolving credit easily and should pay your bills on time each monthly. Avoid accumulating too many debts by only charging what you can afford each month. If you don't have any installment credit, try to get a small personal loan. This will show lenders that you can handle different types of credit.
It can help you keep your credit utilization ratio low
The credit utilization ratio (or credit utilization) is the ratio of your total credit card credit to the amount you are using. This ratio is usually expressed in percentages, such as 25%. 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 many steps you can take in order to reduce it. Limiting the balances on credit cards is a good place to start. Keep your credit card balances below 50%. This is particularly important if you have multiple credit lines.
Avoid making large credit card purchases. 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 in case you are applying for a loan within the next few months and need to maintain a high score.