How Taking a Line of Credit Affects One’s Credit Score
One of the frequently asked questions (FAQs) on finance is, “Does a line of credit affect credit score?” As it turns out, in many respects, it does.
A component of one’s credit score is his or her credit utilization ratio or rate. This is the credit amount one uses at a point in time compared to the total amount that is available to him or her. If one always has a high balance on a line of credit account, then this reflects badly on their credit and could just lower their score.
Activity Also Matters
If one maintains a zero balance on a line of credit account, then his or her financial institution might just stop reporting it from thereon, and then it would not benefit the former’s credit score. It is vital to keep that element active so that the credit utilization rate stays low. Aside from that, you would be well served to look for some tips on the internet for taking on healthy credit habits.
Make Timely Payments
As with a credit card or any type of LOC, one must make scheduled payments in a timely fashion. Missing a payment date or paying late could just lower one’s credit score. One can set a reminder alarm on their smartphone to make payments on time.