Home Equity Line of Credit Question(s)

[Anonymous]

My girlfriend has a good, long credit history/score. She has an appointment to apply for an HELOC this Friday. I'm estimating her LOC will be between 35-45K, interest is prime+0 for life. I'm the one who advised her to look into this LOC because she is considering putting a garage on some land she is acquring in the near future, and she was talking about shopping for a new CC soon, when her current int. rate BT rate goes up, etc. I told her it would be good to have for any misc. situation like this.

My question is, I'm assuming this should help her credit score in terms of utilization, but are there any negative ramifications to consider in terms of score? And, when she shops for a new car loan in the future, will this possibly limit her because she will have so much available credit already? Any other items she should consider before completing this? Thanks in advance...

[Anonymous]

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@Anonymous wrote:

My girlfriend has a good, long credit history/score. She has an appointment to apply for an HELOC this Friday. I'm estimating her LOC will be between 35-45K, interest is prime+0 for life. I'm the one who advised her to look into this LOC because she is considering putting a garage on some land she is acquring in the near future, and she was talking about shopping for a new CC soon, when her current int. rate BT rate goes up, etc. I told her it would be good to have for any misc. situation like this.

My question is, I'm assuming this should help her credit score in terms of utilization, but are there any negative ramifications to consider in terms of score? And, when she shops for a new car loan in the future, will this possibly limit her because she will have so much available credit already? Any other items she should consider before completing this? Thanks in advance...

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1.  This can help utilization or not.  HELOC's with $40k plus CL usually are not used by FICO in utilization.  This helps if the HELOC is carrying a balance.  This does not help if you were hoping for it to improve utilization on current CC balances.

2.  This should not affect her ability to get an auto loan with "good, long history" and good credit.

3.  Based upon the APR you stated, this sounds reasonable for the intended purpose.  She might consider putting someting in the mortgage threads to see if the mort experts have any advice.

[Lel]

I'll move this over to the mortgage loans board, though txjohn has already done a good job of covering the bases.

It's not known exactly what the CL cutoff is for a HELOC to be treated as an installment loan vs revolving debt, but around $40,000 is a number that is commonly bandied about.  If she is able to qualify for a HELOC with a higher CL, say $50,000 or more, then it's more likely that it will be scored as installment.

I have a HELOC with a $98,000 limit.  It was originally maxed out because I used it to refi a fixed-rate home equity loan with a much higher interest rate.  This maxed out CL has never factored into my revolving utilization.

I took a minor hit on my score - maybe 10 points - for the new account when it hit my CRs.  However, I recovered those points within a month or two.

I opened my HELOC about 15 months ago.  Just a couple weeks ago, I applied for an auto loan.  My HELOC balance is still around $90,000.  I had no trouble getting approved for a decent chunk of money, at a very good interest rate for a commercial bank (4.24%).  So, the HELOC hasn't had a negative effect on my ability to obtain new credit.