Six Keys for Creating Good Lines of Credit

Thursday, December 17, 2015, 6:00 AM | Leave Comment

Diversity is important when building solid lines of credit since it represents how well you manage risk. Quality lines of credit should include both installment and revolving lines.

Installment loans are usually secured by collateral such as a mortgage or vehicle and revolving lines are mainly reserved for credit cards. 

Installment business loans can also offer another variable in the credit equation.

It offers banks a chance to see a line of credit associated with the healthy risk of a business venture and many of these lines can provide additional leverage down the road in case a business expands.

To make sure you or your business is ready to dive into deeper financial waters, make sure you know the keys for creating good credit.

Six Keys for Creating Good Lines of Credit

  1. Create a Strong History

    Good credit lines start with a strong and clean history. This takes time to accomplish.

    A good foundation of paying on time and resisting the temptation to overextend helps.

    Make sure you are ready to pay back whatever you borrow and build up a portfolio of good reputation with lenders.

  2. Prevent Balance Rollovers

    Credit rules may change in a subtle ways over time depending on the market.

    However, you should try to never carry a balance over 10% on revolving credit.

    Excellent history shows typical balances of 20-30% usage each month, and paid in full before the due date.

    This shows lenders there is proper use of credit and debt-to-income ratio proportions.

  3. Slow and Steady

    Avoid the temptation to open up several lines of credit all at once. Each line of credit casts a hard pull on a credit report.

    Consider opening a new line of credit once a year at the start.

    Less is more in the world of credit as well. A solid performance of 3-5 lines of credit over several years yields better results that a wide variety.

  4. Good Loans Versus Bad Loans

    Believe it or not, there can be loans that can improve your score, but look less favorable over time.

    Payday loans and quick cash loans can improve credit scores.

    However, these types of loans are lackluster in terms of quality of credit line.

    They represent a high level of risk and lack the strength of more stable forms of long-term credit.

    For businesses it’s best to stick with loans from places like, where they are specific to them.

  5. Transfer and Consolidate

    Consolidating previous balances throughout your spread of credit can prove to be helpful in reducing debt loads on individual lines of credit.

    For example, a home equity loan, or line of credit can be used to pay off high interest credit card debt. A HELOC or home equity line of credit is more difficult to obtain.

    However, it provides a standard revolving line that can be used to establish a note of history rather quickly.

Carefully developing a solid credit report and credit line history has some art to it.

However, it’s simple when you follow a system of steps from the beginning.

Consider using these tips to either start or improve your existing lines of credit.

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