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New Member
DaleOC
Posts: 3
Registered: ‎08-31-2007
0

Want to avoid a mistake - re new HELOC account

My wife and I share a 780 FICO score, have $133K remaining on our 1st mortgage, no car loans and pay off our CC monthly (typically $2-4K/mo usage on $15K availiblility). Daughter in college so we have $60K in federal Parent PLUS student loans. My wife is employed while I am currently unemployed. We need to do some work on our home and just received a HELOC offer from WaMu (our checking account is with them).
 
In checking with the lender we qualify for a $475K line with option to convert any borrowings to fixed rate with repayment terms out to 20 years. There is no annual fee or minimum takedown of balance requirements. Our home repairs/improvements will probably total $50K; the student loans will reach $160K by 2010.
 
I was told we could start with a lower line amount and increase it later. If we convert the student loans to the lower fixed interest rate option under the HELOC and add the home repair costs, then we will be below 50% usage on the $475K HELOC.
 
Here is the question: Do we harm our FICO score and creditworthiness by accepting the full $475K line now? If we do combine the loans as described above on a lower HELOC line amount do we trigger a utilization % penalty?
Moderator Emeritus
Timothy
Posts: 9,252
Registered: ‎03-19-2007
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Re: Want to avoid a mistake - re new HELOC account

HELOC loans SHOULD report under mortgages.
They are secured by real property.

Just ask WAMU.

Will the interest rate be lower on the HELOC than the Student loans?

Are SL's private loans?

Is there any expectation of the student to pay some of the student loans?
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fused
Posts: 16,374
Registered: ‎03-12-2007
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Re: Want to avoid a mistake - re new HELOC account



Timothy wrote:
HELOC loans SHOULD report under mortgages.
They are secured by real property.

Just ask WAMU.

Will the interest rate be lower on the HELOC than the Student loans?

Are SL's private loans?

Is there any expectation of the student to pay some of the student loans?

Actually I disagree:smileyhappy:, HELOC are in fact lines of credit and should be reported as revolving. Do I like it, no, but it's appropriate. Now home equity loans, they are entirely different.
Credit Profile -
FICO 08 Scores (09-16-2014): EQ 824, EX 817, TU 822
All three scores were 850. Lost points for not having an open installment TL. So, BE WARNED!!!!!
Credit History: 26+ years ~ AAoA: 12 years ~ Util: 1% ~ Inqs: EX 1 (Amex 07-15-2014)

New Member
DaleOC
Posts: 3
Registered: ‎08-31-2007
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Re: Want to avoid a mistake - re new HELOC account

Thank you for replying to my posting. While I understand that how WaMu reports the HELOC matters, my original message addressed a different question.
 
I want to avoid inadvertantly damaging my credit score. Will accepting the large credit limit be detrimental to my credit score? Or, will it keep my utilization % low and therefore help maintain my FICO score? I recall reading somewhere that having "too much credit available" is bad for one's FICO score and I don't want to trigger anything that lowers my score unnecessarily.
 
Moderator Emeritus
Timothy
Posts: 9,252
Registered: ‎03-19-2007
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Re: Want to avoid a mistake - re new HELOC account

More about utilization.

Might scare someone on a manual review IF you didn't have the income to back it up. I sounds that is not the case.


HELOC report as revolving - dang that sucks.....
Moderator Emeritus
Tuscani
Posts: 6,182
Registered: ‎03-29-2007
0

Re: Want to avoid a mistake - re new HELOC account

While HELOCs almost always report as revolving, you can certainly ask the lender if they would be willing to report as installment.
New Member
Rorer_714
Posts: 4
Registered: ‎08-26-2007
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Re: Want to avoid a mistake - re new HELOC account

[ Edited ]
 
NM



Message Edited by Rorer_714 on 09-14-2007 10:23 PM
"Go Ask Alice"
Contributor
autofly
Posts: 92
Registered: ‎08-07-2007
0

Re: Want to avoid a mistake - re new HELOC account

I'll take a stab~
 
You do not want to combine any student loans or parent plus loans with anything.  You should get a much lower intrest rate on the student loans by themselves.  After she gets finished with school and you are done taking out the plus loans you could then think about consolidation. 
 
When I consolidated mine I startet off at 3.75% but now is down to 2.25% after 3 years of perfect payment history.  You probably don't want to consolidate before you are finished taking out all of her loans, because if I recall you are only allowed to do this once. 
 
Another thing you want to take into consideration is that with the parent plus loans you may be elligable for defferment with them if the need arises.  If you change them into any other type of loan you will not be eligable for defferment.  When the time comes to consolidate them you will want to make sure that you are not waiving all future defferments by consolidating.
 
Finally,  the worst reason to combine the student loans with another type of loan, is that if somthing happens to you your family should not be held liable for the money from any student loan.  If you take it out of a student loan status then your family/estate would be liable for all of that money as it is not a student loan.
 
Hope that helps,
 
Auto
New Member
DaleOC
Posts: 3
Registered: ‎08-31-2007
0

Re: Want to avoid a mistake - re new HELOC account

Autofly,
 
Thank you for the detailed reply. You bring up several valid points re deferment and asset isolation in the event of default that we will carefully weigh. For the moment we are not planning on moving the debt under the HELOC, but we would have that as an option depending on the size of the HELOC we get.
 
[The whole rate situation did change as of 7/1/06 when the federal government reduced its subsidy of student loans. Right now new PLUS loans are at mandated 8.5% fixed with a 3% origination fee and a 10 year term. Repayment begins 60 days after the loan is fully disbursed in a given year (in our case the beginning of the 2nd semester each year).
 
Through a consolidation we reduced the first loan to 8.25% with automatic payment. After 36 consecutive on-time payments it will drop to 7.00% fixed (non-deductible). As you can see, the days of highly advantaged rates on student loans are gone.]
 
Back to my original question, I may need to restate it so it is the focus of replies because I'm not feeling any more infomed about my decision.
 
If YOU faced this opportunity, would YOU take the full $475K HELOC availability? If not, what causes you to take something less?
 
(Holding aside the possible uses of the funds, or if my daughter will be making any of the payments (she won't, but she will have some Stafford student loans in her name), whether the lenders are harming all borrowers by reporting HELOCs as revolving debt, etc. I'm sure WaMu has figured out how they will report these laons somewhere in the first 250,000 of them that they did and I am unlikely to get them to change their ways! LOL!)
 
Thank you again to anyone able to help enlighten me about this question. Regards to all.

DaleOC

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