How does your HELOC report balance to CRA?

[Anonymous]

Hi, wondering if anyone else has this problem?  Just found out that B of A is reporting my HELOC balance not as principal balance but payoff balance, which is principal plus interest owed at the end of the month.  This makes my balance look higher than my limit (I've charged up almost to the max) and makes it look as though I'm overdrawn, which I am not.  I've never heard of a mortgage lender reporting like this before (used to be a loan broker--looked at hundreds of credit reports).  Anyone else who has a HELOC who has had a credit pull lately, could you look at your balance and see if your bank is reporting your balance as principal + interest, or principal only?   Thanks for any info you can give me.

[Lel]

My US Bank HELOC is reporting principal + interest also.

This may be because HELOCs aren't "real" mortgages, in the way that a first-position loan or a traditional home equity (that is, fixed-rate) loan.  They are often reported as revolving credit rather than installment credit, even though they might be scored as installment by the FICO formula.

Since interest on a HELOC accumulates daily, with no grace period like credit cards, then conceivably the lender would report the actual balance of the HELOC on the day that they report, which includes the principal and accumulated interest.

[Anonymous]

Thanks for your info.  Interesting that US Bank is doing this also.  I heard from someone who has a Countrywide account (now B of A) and he says they report principal only for him.

Accordnig to TU training guide on the TU website, the definition of "balance" is murky:  "Balance owed as of the date verified." 

BUT "balance available" (expressed as a ratio) is is "calculated by subtracting balance from credit limit divided by credit limit" (also according to TU website).  So by this definition, reporting principal  + interest as "balance" makes this field wrong.

Don't know if it makes any difference to you, but it does HUGELY to me, because that shoots my "balance available" into negative territory and brings down my overall utilization.   And yeah, I suppose I could pay it down but then they may very well lower my limit (housing prices in my area have taken a big dive) and I'll be right back where I started.  

Anyone else?

[Jazzzy]

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@Lel wrote:

My US Bank HELOC is reporting principal + interest also.

This may be because HELOCs aren't "real" mortgages, in the way that a first-position loan or a traditional home equity (that is, fixed-rate) loan.  They are often reported as revolving credit rather than installment credit, even though they might be scored as installment by the FICO formula.

Since interest on a HELOC accumulates daily, with no grace period like credit cards, then conceivably the lender would report the actual balance of the HELOC on the day that they report, which includes the principal and accumulated interest.

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I wanted to add a word of recent experience here. My husband has a Discover, and I'm an AU. I got a nice letter from Discover this week asking me to apply. So I did.

Declined because of "Excessive amount owed on revolving accounts reported by agency." I am immediately thinking "Mistake!" because we don't even owe 1% on our credit cards. We don't carry revolving debt.

The written denial tells me that they pulled from TU. That's when my HELOC dawned on me. We have no underlying mortgage on our home, just a HELOC. TU reports our HELOC as "Overdraft/Reserve." In my TU FICO score, I know the HELOC is not considered revolving for the utilization percentage...but apparently Discover's computers consider it revolving.

HELOCs can cause their own form of chaos on credit reports. I don't care about the Discover, but I do care about the 9 points it cost me on EQ for the inquiry. (BTW, ScoreWatch for EQ tells me I had a Discover inquiry...yet Discover told me the info came from TU. I was able to pull a free TU report because of it. Makes me think Discover pulled from two agencies....as if one ding isn't enough.)

[Anonymous]

LynetteM;  That's outrageous!  They are just shooting themselves in the foot--denying credit to someone like you.  What do you suppose is "overdraft/reserve" ?  Do they report your limit?   I've never heard of that category before.  On my TU report, B of A lists my HELOC account as Home Equity Loan:  line of credit account. 

[Jazzzy]

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@Anonymous wrote:
LynetteM;  That's outrageous!  They are just shooting themselves in the foot--denying credit to someone like you.  What do you suppose is "overdraft/reserve" ?  Do they report your limit?   I've never heard of that category before.  On my TU report, B of A lists my HELOC account as Home Equity Loan:  line of credit account. 

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I know that credit is getting tougher, but I was surprised at the decline...especially the reason. My HELOC is the only demon I can imagine. They do show the beginning balance and the current balance. EQ reports it as an installment account, and I know that TU doesn't count it in my revolving utilization...but Discover picked it up as revolving. It's a $150k HELOC...but we don't have an underlying mortgage and we don't carry revolving balances.

I've requested the free copy of my TU report. I want to make sure I'm looking at the same report they are, and then I may call for a reconsideration. I applied online, and the decline came back immediately...so I know this is a computer decision. I may try a real person.

[Anonymous]

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@LynetteM wrote:

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@Anonymous wrote:
LynetteM;  That's outrageous!  They are just shooting themselves in the foot--denying credit to someone like you.  What do you suppose is "overdraft/reserve" ?  Do they report your limit?   I've never heard of that category before.  On my TU report, B of A lists my HELOC account as Home Equity Loan:  line of credit account. 

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I know that credit is getting tougher, but I was surprised at the decline...especially the reason. My HELOC is the only demon I can imagine. They do show the beginning balance and the current balance. EQ reports it as an installment account, and I know that TU doesn't count it in my revolving utilization...but Discover picked it up as revolving. It's a $150k HELOC...but we don't have an underlying mortgage and we don't carry revolving balances.

I've requested the free copy of my TU report. I want to make sure I'm looking at the same report they are, and then I may call for a reconsideration. I applied online, and the decline came back immediately...so I know this is a computer decision. I may try a real person.

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My $50K HELOC reports as "Overdraft / reserve checking account" on my TU report also. My guess is that TU uses that classification for HELOCs with CLs greater than $30K, since that's their cutoff for reporting as revolving.

Even though a large HELOC may not be categorized as a revolving account on TU's report, or in certain scoring models, that doesn't mean Discover can't reclassify it for their own approval process. In general, Discover is a fairly conservative lender, so it's not too surprising that they might place more importance on a large balance carried elsewhere. Also, it's quite possible they pulled reports from both TU and EQ as you suspect - banks that traditionally pull a single CR have occasionally pulled a second CR more often these days.

However, the fact that there is no underlying mortgage should make a huge difference. Have you called Discover and pointed that out, and asked for reconsideration?

Message Edited by Revike on 10-24-2009 09:47 PM