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I've got a home equity loan with a balance of $98,000 at 8% fixed. The current interest rate on a Bank of America HELOC is 4.99%.
I'm thinking about refinancing my loan with the HELOC. I've been told that I can get line of about $150,000. Thus, I would be using about 66% of this credit line once the fixed rate loan is paid off with the HELOC.
Bank of America says that they report HELOCs as revolving, which thus puts it in the same category as credit card debt, even though I (like many others) am using it as a second mortgage.
I have a total of ~$80,000 of available credit in all my credit cards combined, and never carry a balance. Add this to the $150,000 HELOC and my total credit available is $230,000. Using $98,000 to pay off the original loan would put my utilization at 43% - well above the ideal 9% utilization ratio.
If I were to go ahead with the scenario above, my FICO scores would almost certainly drop from their current levels (785-795).
Is there any way to predict just how much they might drop, given the high utilization ratio? Has anyone out there done something similar, and if so, how did you scores react? Was it a temporary drop, or have your scores languished at the lower level? Is there any way to convince the CRAs to report the HELOC as a mortgage rather than a revolving line?
I'm trying to preserve my credit scores, because I hope to refi my first mortgage if jumbo conforming interest rates come down to traditional conforming levels. But I'm so tempted by the current low interest rates of the HELOC.
Lel wrote:MidnightVoice, did you suffer a drop in your scores after getting the HELOC? Are you using a large amount of your line?
@Lel wrote:
MidnightVoice, did you suffer a drop in your scores after getting the HELOC? Are you using a large amount of your line?ByrdMan, I will be very interested in finding out how your scores react, though it will be difficult to parse out just how much of your score change is due to the HELOC, since you will have other new loans that are going to affect your score. Are you going to max out the HELOC when you get it - that is, are you using this as an alternative to a fixed rate home equity loan?I've read elsewhere on these forums that different CRAs report HELOCs differently. I'll see if I can find the threads. The B of A folks who are trying to sell me the HELOC all say that it won't affect my scores whatsoever, although they are very quick to acknowledge that it reports as revolving. I don't really believe them, and that's why I'm on this board trying to find some folks like you with no conflicts of interest who can provide some real-world experiences. Thanks for your replies.
@Junejer wrote:
Lel, I am about to find out the same thing. I was told a few weeks ago that the $150M amount is not counted in uti by FICO.
Hi ByrdMan,
Did that HELOC hit yet? If so, how did you scores react?
So tempted to jump at that HELOC - B of A offering prime - 0.51%. So much better than my 8% home equity loan.