WOULD SOMEONE PLEASE EXPLAIN HOW A LINE OF CREDIT WORKS?

[Anonymous]

Ok, I recently was approved for a cc with alliant cu for $5000.  Do they normally match that with a LOC and how does a LOC work?

Should I ask for more upon activation?  The rep said I grade at a B as for as credit scores.

Thanks

[Anonymous]

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PositiveChange wrote:

Ok, I recently was approved for a cc with alliant cu for $5000.  Do they normally match that with a LOC and how does a LOC work?

Should I ask for more upon activation?  The rep said I grade at a B as for as credit scores.

Thanks

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A line of credit is similar to a credit card, in that it is a revolving account.  You may acess any amount up to your credit line, and as you make payments, those amounts again become available to be accessed.

A couple of the differences between a LOC and a CC are:

• You don't receive a physical card for a LOC.  You normally access your CL through checks or via a direct transfer of funds into another account you have.
• The minimum monthly payment on a CC is usually determined by a certain percentage of the outstanding balance, like 3% or so, or 2% plus accrued finance charges, and so on.  A LOC, however, sometimes has repayment terms that are similar to an installment account, where the minimum monthly payment is a fixed amount over some predetermined period.  With this type of repayment term, even as your balance decreases over time, your minimum payments will remain the same until you either 1) PIF the outstanding balance or 2) access your revolving CL again.

Hope this helps.

[Anonymous]

YES! THAT DOES HELP THANKS...

Do you think I will get the LOC?  Is that the norm once one is approved for a cc through a credit union?

[Anonymous]

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PositiveChange wrote:

YES! THAT DOES HELP THANKS...

Do you think I will get the LOC?  Is that the norm once one is approved for a cc through a credit union?

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I'm not familiar with that CU, so I don't know what their requirements are.  I have heard several stories of CUs giving CCs and LOCs with matching lines, though.  It does seem to be a common theme.

If you really want it, call and ask them.  Most CUs are very up front in answering questions like this.

[Anonymous]

NFCU just instantly approved me online for a $5K LOC.  I'm surprised and happy.   I wasn't really sure what a LOC was either until I read Cheddar's reply in this thread.  So I called and spoke with someone and she told me basically the same things that Cheddar said.  She told me to ask for the amount that I want because if I'm approved that's exactly what I'll get.  But if I don't qualify for that amount, they'll bump it down to what they think is appropriate.  So I asked for 5K and that's what I got.  I kinda wished I asked for more now!

My question is - will this report to the CRA's as an installment loan?  Or will it only report if I actually take a loan from it and repay it?  The reason I wanted to get it was for the overdraft protection and hopefully I will not need that.   But if I can get some positive CRA reporting out of it, that's great.

Thanks!

[Anonymous]

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kball64 wrote:

NFCU just instantly approved me online for a $5K LOC.  I'm surprised and happy.   I wasn't really sure what a LOC was either until I read Cheddar's reply in this thread.  So I called and spoke with someone and she told me basically the same things that Cheddar said.  She told me to ask for the amount that I want because if I'm approved that's exactly what I'll get.  But if I don't qualify for that amount, they'll bump it down to what they think is appropriate.  So I asked for 5K and that's what I got.  I kinda wished I asked for more now!

My question is - will this report to the CRA's as an installment loan?  Or will it only report if I actually take a loan from it and repay it?  The reason I wanted to get it was for the overdraft protection and hopefully I will not need that.   But if I can get some positive CRA reporting out of it, that's great.

Thanks!

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Congratulations on your approval!

A LOC is a revolving account and should report as such.  It will count the same as a credit card in your FICO scores, and it will count in utilization, so use it wisely.

[Anonymous]

Oh very nice!  Thanks Cheddar!

[Anonymous]

My CU calls my CC a LOC, lol.

It is a Visa, with a 7500.00 CL that I have had for years. Works just like a CC, the minimum payment floats with the balance, but my statements call it a LOC.

It does have an awesome 9.1 % Interest rate. Right up there with my AM/EX Blue, at 9.9%.

If I ever plan to carry a balance for a few months, I use one of those cards.

I am proud to say right now, the only installment payment right now is my mortgage.