HELOC

[SouthJamaica]

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@DaveInAZ wrote:

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@SouthJamaica wrote:

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My advice would be not to borrow against your home. It's too risky. Your home is where you live.

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It's risky to rent, if you can't pay the rent you get evicted. The point being 99% of folks pay for a place to live, either rent or mortgage. Living is a risk, you can die anytime.

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It's one thing to borrow to enable onesself to buy a home; the mortage payment is an alternative to paying rent.

It's quite another thing, however, once one has been in a home, and has been making payments, to dig a deeper mortgage debt hole than one already has.

People who have lots of money don't need to borrow against their home.

People who don't have lots of money are jeopardizing their future by borrowing against their home.

That's my opinion. You're entitled to your opinion, I'm entitled to mine.

[K-in-Boston]

if we could stick to OP's topic rather than making judgments about what types of loans are acceptable to some posters and which ones are not, that'll avoid the headaches of removing posts, sending warning PMs, and possibly taking further actions.  Thanks for your cooperation.

[Anonymous]

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@K-in-Boston wrote:

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@Anonymous wrote:

Edited:

FYI, EQ8 and EX8 tracks:

(-) Proportion of balances to credit limits on revolving HELOC accounts is too high

(-) Proportion of revolving HELOC balances to total revolving balances is too high

notice it said to total revolving balances, not limits. 

So not only does it look at a HELOCs’ individual utilization, but it also looks at a special utilization of HELOC balance/aggregate Revolver Balance, interestingly enough.

So EQ8 & EX8 definitely look at HELOCs in more depth than TU.

so it wants to know what percentage of your aggregate revolver balances (not limits) are from HELOCS. So, how much of your revolving debt you're carrying on the HELOC, basically.

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Has anyone reported actually seeing those reason codes?  I'm wondering if perhaps those reason codes were in a whitepaper and not actually implemented, or if they perhaps only apply to smaller HELOCs?  I had a massive HELOC balance which one would think I would have been penalized for or at least seen as one of the primary reason codes if that were the case (it was after all almost the entirety of my revolving credit balance, and it was very heavily utilized), yet my scores were in the 820s and 830s when it reported (EQ was 833, for example), deviation from higher scores could easily have been explained by aggressive credit-seeking, and scores did not increase as the balance on the HELOC came down to the typical revolving thresholds.

There definitely seems to be a point where HELOCs seem to be excluded (other than age metrics).  I wasn't expecting a disclosure of the actual numbers since those are proprietary, but did pose the question during the myFICO AMA.  The answer I received was:

For older score versions, HELOC accounts may be considered in the score including in several balance and utilization related characteristics. For newer score versions, HELOC accounts may not factor into balance and utilization.

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@K-in-Boston You know what? I just had another thought. Some reason codes are unique to the industry variants only. Possibly only to certain industry variants that we don't know. 

so, my point is maybe that was a reason code for the mortgage version of the fico algorithm that never caught on. that could be a possibility?

and to expound on the AMA answer, in my opinion, it appears perfectly accurate that on the older versions, a HELOC may be included in revolving balance and utilization characteristics. The word may is used imho because it is believed they are excluded above a certain dollar amount. For EX2, it's somewhere between $31,000 and $34,900. For 4/5, it's $35,000. 

now as to 8/9, they may not factor into revolving balance and utilization imho, because they have their own special HELOC metrics measuring them, Kind of like EX2's special utilization Metric for chargecards/open ended accounts. Make sense? Thoughts?

[K-in-Boston]

I believe the "may" and "may not" answers were completely referring to the size of the line, and we had long suspected that larger lines were excluded.  I think it's entirely plausible that the codes may in there solely for industry variants, though.  Just one of those things where looking at my profile at the time of it reporting, if those were negative reason codes then one or more should in all likelihood be one of the biggest factors that were affecting my score.  But again, no change when it reported other than a couple of points that one might naturally expect with a new account and possibly a new HP, and then no gains as the balance came down.

[Anonymous]

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@K-in-Boston wrote:

I believe the "may" and "may not" answers were completely referring to the size of the line, and we had long suspected that larger lines were excluded.  I think it's entirely plausible that the codes may in there solely for industry variants, though.  Just one of those things where looking at my profile at the time of it reporting, if those were negative reason codes then one or more should in all likelihood be one of the biggest factors that were affecting my score.  But again, no change when it reported other than a couple of points that one might naturally expect with a new account and possibly a new HP, and then no gains as the balance came down.

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@K-in-Boston yeah I believe those codes may have been for the mortgage variant that didn't catch on. I agree that you should've saw that code if the majority of your debt was on the HELOC, in comparison to revolving utilization and balances. 

no doubt the word 'may' was used because of the exclusion of revolvers above the cutoff for 5/4/2. But for 8/9, I don't know of anyone finding a cutoff amount, do you? 

I think it makes sense that they made special metrics for HELOCs for 8/9, considering they were doing a workaround in the old versions by excluding the higher dollar amounts to try to exclude HELOCs, at least that was my understanding of the reason, if that's correct.

But the fact that those reasons codes exist, indicate that it is one of the ~500 characteristics available to be chosen as a scoring metric when they generate the algorithms at the bureaus. Since it is a comparatively low risk debt being secured, it would make sense that it is weighted lightly.

I think it's possible the metric is still used, but it's utilization is weighted lightly, similar to  mortgage loans. Also, the metric could be used without the code being thrown?

what do you make of the fact that he said may not when he referred to the newer versions? If he used may to indicate the existence of the cutoff's on 5/4/2, what in your opinion would be the significance/distinguishment of using may not instead of may for 8/9?

There has to be difference in treatment or he would not have worded it in the opposite manner, I would think. Thoughts?