My dh and I recently took out a home equity loan in order to purchase a piece of land. I monitor our credit reports since we're getting ready to apply for a construction loan. We took a hit of 70 points when the car dealership shopped around dh's new car loan a few months ago. We then took another hit when the mortgage co. pulled our credit twice (once at application, once when we closed) on the home equity loan. Ok, fine, I figured the score would pop up a little every month as we got further from the credit inquiries. Imagine my shock when I checked dh's credit score yesterday. The home equity loan is not reporting under the real estate section, it's reporting as a revoling loan account - in essence it looks like a credit card. So it appears to EQ, TU, et al that we owe $100k on credit cards!!! They've also figured our monthly credit card payments in the area of $1700/month. Not even close!! Our home equity loan payments are only $280. Can this get fixed? How can I get them to report as a regular mortgage and not as a revolving loan account? Can I even do that? If not, will our credit score even come up in the near future? It's going to look like we owe that much on credit cards until we sell this house and pay off the mortgage and the home equity. Our score's in the toilet for a long time, as far as I can see. We dropped 40 points over this and, given all the recent credit inquiries from those morons at the car dealership and the mortgage lender, our score is down almost 150 points and we don't even meet the minimum score to qualify for the damn construction loan!
cbright, 2 factors determine 65% of your credit score- payment history (35%) and amounts owed (30%). A lot of people often refer to amounts owed as your "credit-utilization" score. For revolving credit, like credit cards, FICO looks at your credit limit vs. your monthly balance. For installment loans, like a car loan, FICO looks at the ratio of the original loan amount to your outstanding balance. As you well know, revolving credit counts more towards your ratio than installment debt. A HELOC will definitely affect your credit-utilization ratio. My understanding is that a sizeable HELOC of $100K should be counted as an installment loan. A small HELOC is viewed as revolving credit and will often have more impact on your ratio. Try making an official inquiry through whatever company you use to monitor your credit. If you're willing to take the time, you should be able to get this fixed. Your personal inquiries will not affect your score at all. Hope this helps.
Forgot to mention If the loan you took out to purchase some land was really a Home Equity Loan, it should certainly be treated as an installment loan. However, given that you're payments are only $280, I'm assuming that you must have an interest-only HELOC. If not, share the name of your banker with us all because you landed a sweet deal.
