I've read through and noticed that some people have noted that Home equity loans or lines of credit (known as HELs or HELOCs respectively) negatively affect your credit score. Is this true? I WAS cautioned that if I was going to use a HELOC, to ask for a much higher amount than I wanted to use, so that my limit would be high, but my actual use would be within credit ratios. Is this the problem? I.e. are most people deciding they need a certain amount....say...$10k, so they get a HELOC for $10k...then it hits their CR and shows as a credit line with 100% utilization, thereby tanking your FICO? In the above scenario, wouldn't requesting a HELOC for $40k, but only using the 10k you need fix this? I need to figure this out as we were about to get one or the other early next year. Anyone have direct experience with this on their report? aiki
there are numerous factors in the equation - do they report as a line of credit or a mortgage? what is your overall utilization of your credit? getting the higher line w/low utilization may help your score, but kill your debt ratio - as a lender i have to base your debt ratio as if the whole line is being utilized.
Aiki I love you!!!!!!!!!!!!!!!!!! This is exactly the train of thought you need to have. So many people get a heloc for JUST the amount they need..and then the thing is at 100% utilization and their scores sink faster then rock. You MUST stay below the 50% mark for most helocs because they show up as revolving. So wheres the best place to go for a heloc? Not a broker......try your local bank and then if that doesnt work call the banks in your area or check online at wells fargo, us bank, bank of america, etc...see who had the sexiest deal going and go for it!
