Diversifying your credit can help you qualify for a home equity credit line. You can keep your credit utilization low by having different types of credit accounts. Your credit score will rise if you have more than one type. 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
A key part of your overall credit strategy is mixing your credit histories. Lenders appreciate a diverse range of credit accounts. Having a mix of both new and old accounts helps your FICO score. Do not get too excited about opening new accounts to boost your score. It is better to maintain a healthy amount of credit than to borrow the maximum amount you can afford.
Ideal is to have both revolving or 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 rate is a measure of how much revolving debt you use relative to total credit on your cards. It is often expressed as a percentage, such as 25 percent. A good example is if you have $10,000 but only $500 on your two cards, then your credit utilization percentage is 50 percent.
Credit scores will decline if you have a high credit utilization ratio. There are several things you can do to lower it. You can start by limiting the amount of outstanding balances on your credit cards. Keep your credit card balances below 50%. This is particularly important if you have multiple credit lines.
The next step is to avoid large purchases made with credit cards. Large purchases made on credit cards can increase credit utilization. Pay these debts off as soon and as quickly as possible before they become due. This will ensure that you don't report a high utilization percentage to the credit bureaus. This is especially important for those who need to apply to loans in the near future.