cancel
Showing results for 
Search instead for 
Did you mean: 

Line of credit from a bank?

Established Contributor

Line of credit from a bank?

The last time I went to the bank, the teller asked me if I wanted to apply for a CC (I'm assuming I'm pre-approved in their system). When I mentioned that I already have several CCs (two of which are with them) and I want to pay them off, he mentioned that I could apply for a line of credit. At first I ignored his suggestion but now that my utilization has creeped up a bit due to some unforeseen expenses, I have now taken it into consideration. Does anyone have experience with opening a line of credit from their bank? How does it report? Any and all help/suggestions/advice would be greatly appreciated. Thanks in advance!


Starting Score: 760
Current Score: 716 Equifax 754 TU 736 Experian
Goal Score: 760
Message 1 of 9
8 REPLIES
Community Leader
Legendary Contributor

Re: Line of credit from a bank?

An LOC is, in basic definition, a revolving line of credit.  They give you a limit, with discretion to use credit up to that limit, and thus monthly balances that change (revolve) around your usage.  Installments have a preset amount of bucks provided to you at time of contract, with fixed monthly repayments.  Using more credit requires a new contract.

 

Some LOCs are really about the same as an unsecured CC, differing primarily on how you "charge" against the limit.  No actual plastic.

However, they almost always offer a lower interest rate.  That, in my opinion, is the major plus.

Many revolving lines of credit are secured by way of some property, such as HELOCs.  A lot less risk on the part of the creditor.

Some offer preset monthly payments, beginning to look and feel more like installment loans.

When LOCs get up to a certain level, I believe around 35K, they are no longer scored as revolving.  Many HELOCs fill that bill.

 

I have an LOC with my local CU  with a limit of $3K, and it scores as a revolving account.  It is my biggest ding in % util.

Message 2 of 9
Regular Contributor

Re: Line of credit from a bank?

I have a LOC with a $25K limit at my CU and it reports as a revolving account so it impacts my utilization. If you do apply for it the LOC it should help your utilization depending on the size of the CL. If you use the LOC to pay off your CC's - there is no impact to your utilization as they all report as revolving accounts. I think the LOC would be a good idea - mine has come in handy for emergencies and such.

 

FICO: EQ 769, TU 762 , EX ???

Message 3 of 9
Established Contributor

Re: Line of credit from a bank?

Since the LOC functions as an additional line of credit and is scored like CCs, I may just look at getting a personal loan. I don't want my utilization to go up just because I took a LOC to pay off the CCs. Thanks everyone for chiming in.


Starting Score: 760
Current Score: 716 Equifax 754 TU 736 Experian
Goal Score: 760
Message 4 of 9
Established Contributor

Re: Line of credit from a bank?


frogfan12 wrote:

Since the LOC functions as an additional line of credit and is scored like CCs, I may just look at getting a personal loan. I don't want my utilization to go up just because I took a LOC to pay off the CCs. Thanks everyone for chiming in.


+1

 

Personal loans don't negatively impact util, yet you can often clear the balances that do and pay them off at a substantially lower interest rate. I recently did this through 3 Rivers FCU in Fort Wayne, and my monthly payments were reduced by $250/month while bumping up my credit score significantly.

I'm Spartacus!

hr>Starting Score: EQ 546, EX 547, TU 580
Current Scores (lender): EQ 725 , EX FICO 720, TU 737 FICO scores>
Goal Score: 750
Take the FICO Fitness Challenge
Message 5 of 9
Valued Contributor

Re: Line of credit from a bank?

Actually with no additional charges opening the LOC would cause your utilization to go DOWN not UP. If for instance you have 10K in available revolving credit and you have 5K in balances your utilization is 50%. If you open a 10K LOC and transfer the credit card balances to it your utilization is now 25%. 5K of debt on 10K credit cards and 10K LOC or 20K total available.

 

This is like I said assuming no further charges. Some people have run up new charges on their credit cards and now face a mountain instead of a mole hill. As to whether the LOC or a personal loan is a better bet you would have to ask your bank what the interest rate and any fees is on both to compare. Unsecured personal loans usually carry the highest interest rate but YMMV.

Best financial advice I ever got: "Just imagine what an adult would do and do that."

Starting Score: 500's
Current Score: EQ 701 (FICO) TU 721 (FICO) EX 715 (Quizzle)
Goal Score: 760 ALL


Take the FICO Fitness Challenge

Message 6 of 9
Established Contributor

Re: Line of credit from a bank?


CreditCrusader wrote:

frogfan12 wrote:

Since the LOC functions as an additional line of credit and is scored like CCs, I may just look at getting a personal loan. I don't want my utilization to go up just because I took a LOC to pay off the CCs. Thanks everyone for chiming in.


+1

 

Personal loans don't negatively impact util, yet you can often clear the balances that do and pay them off at a substantially lower interest rate. I recently did this through 3 Rivers FCU in Fort Wayne, and my monthly payments were reduced by $250/month while bumping up my credit score significantly.


That's what I'm looking at...lowering my payments/paying off my CCs and increasing my credit score. 


Starting Score: 760
Current Score: 716 Equifax 754 TU 736 Experian
Goal Score: 760
Message 7 of 9
Established Contributor

Re: Line of credit from a bank?


HoldingOntoHope wrote:

Actually with no additional charges opening the LOC would cause your utilization to go DOWN not UP. If for instance you have 10K in available revolving credit and you have 5K in balances your utilization is 50%. If you open a 10K LOC and transfer the credit card balances to it your utilization is now 25%. 5K of debt on 10K credit cards and 10K LOC or 20K total available.

 

This is like I said assuming no further charges. Some people have run up new charges on their credit cards and now face a mountain instead of a mole hill. As to whether the LOC or a personal loan is a better bet you would have to ask your bank what the interest rate and any fees is on both to compare. Unsecured personal loans usually carry the highest interest rate but YMMV.


While that is true, I'd prefer not to have another revolving account as those tend to factor in differently than installment loans. Whenever I've had a new installment loan to add my CR, there has not been any negative effect. New revolving accounts, however, cost me points. Not to mention if my LOC is say 10K and I wanted to use the full 10K I'd be at 100% util. for that particular account. 


Starting Score: 760
Current Score: 716 Equifax 754 TU 736 Experian
Goal Score: 760
Message 8 of 9
Established Contributor

Re: Line of credit from a bank?


CreditCrusader wrote:

frogfan12 wrote:

Since the LOC functions as an additional line of credit and is scored like CCs, I may just look at getting a personal loan. I don't want my utilization to go up just because I took a LOC to pay off the CCs. Thanks everyone for chiming in.


+1

 

Personal loans don't negatively impact util, yet you can often clear the balances that do and pay them off at a substantially lower interest rate. I recently did this through 3 Rivers FCU in Fort Wayne, and my monthly payments were reduced by $250/month while bumping up my credit score significantly.


How much of a loan were you approved for (if you don't mind me asking)? And what was the APR?


Starting Score: 760
Current Score: 716 Equifax 754 TU 736 Experian
Goal Score: 760
Message 9 of 9