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So I just opened a heloc against a rental property for 250k. I opened it for 2 reasons, one the interest rate is crazy low 2.75% and also to have in emergencies. So Its 99% of the time going to be dormant, or used to as a quick source of money then paid off. But I see people making threads about if its maxed out that it appears as a maxed out CC. But is the same true for not being used? Also will it have the negitive effect that CR companies wont like extending more credit because they see a 250k line? Or is it some how catoriged differently there? thanks!
First thing I'd suggest doing is tying down whether it's going to report as revolving, installment, or some combination.
There are a bunch of threads here that discuss the point. For example, you can do this Google search:
site:myfico.com heloc revolving installment
I believe that higher limit HELOCs tend to report as installment, but I'd suggest reading through the threads to catch the various nuances.
In my own experience thus far with my HELOC it reports and gets factored into revolving credit on EX however EQ and TU both see it as a mortgage type account (for whatever reason EX scores it wrong imo because it's secured by the house thus should be a mortgage and not a true revolving account like how CC's are treated).
@JustinS wrote:In my own experience thus far with my HELOC it reports and gets factored into revolving credit on EX however EQ and TU both see it as a mortgage type account (for whatever reason EX scores it wrong imo because it's secured by the house thus should be a mortgage and not a true revolving account like how CC's are treated).
Hmm, typically it's by loan type: if it's a warehouse type line which goes up or down as you use it, it's revolving: if it's a fixed loan which you're paying back in chunks, it's installment.
LOC's including HELOC's should be revolving by that measurement, but I think where this breaks down is HELOC's are traditionally used for a big purchase / debt refinance / rennovations / whatever, and then typically a person just makes regular payments against the tradeline... not certain really how lenders determine it to be reported as one or the other but I don't think that the asset which secures it necessitates it be one or the other.
Sounds like I just have to wait and see, looking back at other threads the consensus is that "usually" an over 50k line gets classified as an installment. IM just worried that having a new mortgage, and opening this line of credit are going to make the credit companies freak out and start slashing limits.
Its an intererest only line for minimum payment also if that makes any difference. Also it was done in my company name with me as a personal gaurentee.
I doubt that there will be trouble, since you have a thick file and pretty good scores.
But I'd watch closely to see how it reports.
It seems unlikely that it would report as revolving. If it did, it would dominate any revolving utilization calculations, which is probably a good thing.
I'd also look at the DTI angle, just in case payments for an unused HELOC magically start to show up in DTI calculations.
If you got the HELOC in a business context, it's always possible that it won't report to personal at all. My business CCs don't show up on personal.