Your chances of being eligible for a home equity card can be improved by diversifying your credit. Diversifying your credit accounts can help to maintain a low rate of credit utilization. Adding more than one type of account will help you raise your credit score. This will increase your payment history. Here are some tips to diversify credit. Once your credit is in order, you can begin applying for a home equity loan.
It can increase the chances that you are approved for loan funds
Your overall credit strategy should include mixing your credit history. Lenders appreciate a diverse range of credit accounts. A mix of old and new accounts will help your FICO score. 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.
You should have both revolving as well as installment credit. You can manage revolving credit easily and should pay your bills on time each monthly. By only charging what you can repay each month, you can avoid creating too much debt. If you don't have any installment credit, try to get a small personal loan. 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 ratio refers to how much credit you use in comparison to your total credit cards. It is often expressed in percentages such as 25%. A good example is if you have $10,000 but only $500 on your two cards, then your credit utilization percentage is 50 percent.
If your credit utilization ratio is high, your credit score will suffer. There are several steps you can take to lower it. Begin by reducing the outstanding credit card balances. The first thing you can do is to not carry a balance exceeding 50% of your credit limit. This is especially important if your credit cards have multiple lines.
The next step is to avoid large purchases made with credit cards. Making large purchases on credit cards can increase your credit utilization ratio. You should pay these debts off as soon possible so that they do not become due. This will allow you to avoid reporting high utilization rates to credit bureaus. This is especially important if your goal is to have the best credit score possible and apply for a loan in a short time.