Your chances of being eligible for a home equity card can be improved by diversifying your credit. Different types of credit accounts can help maintain a low credit utilization. Adding more than one type of account will help you raise your credit score. It will also improve your payment history. You can find out more about diversifying your credit here. Once you have a good credit mix, you can start applying for a home equity line of credit.
It can increase your chances to be approved for a mortgage loan
The key to your overall credit strategy is to combine your credit history. Lenders prefer to see a 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's better for you to keep a healthy credit balance and not borrow money that you can't pay back.
It's ideal to have both installment and revolving 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. A small personal loan can be obtained if you don’t currently have any installment debt. This will prove to lenders that your ability to handle various types of 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. Example: If you have $10,000 and only 500 of it on two credit cards, your credit utilization rate is 50%.
Your credit score will be affected if your credit utilization ratio exceeds 30%. There are several ways to lower your credit utilization ratio. To begin, reduce the amount of credit card debt. Keep your credit card balances below 50%. This is especially important if you have multiple lines of credit.
Avoid making large credit card purchases. Making large purchases on credit cards can increase your credit utilization ratio. It is important to repay these debts promptly, so they don't become due. This will help you avoid reporting a high 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.