Closing HELOC account: How much effect on score & for how long?

[Anonymous]

I would like to close my HELOC account which has been paid off for several years. (It's a huge paperwork hassle proving to the bank multiple times a year that we have enough building and flood insurance on our condo.  Also, we can't even use the account because our home value has decreased.)  The HELOC is $27,000.  How much will this affect our credit score, and for how long?  My current score is 799. We may want to buy a larger home in a couple of years.  Would it help to ask for credit increases on our credit card accounts?  Thanks!

[Revelate]

Likely little to no affect beyond drawing the line in the sand as to where it counts for your AAoA (average age of accounts); however,  it might depend how it's counted... I'm not certain where the breakpoint is for a HELOC being considered revolving vs. installment loan.  If it's counting as revolving, then closing it might have a detrimental effect to your overall utilization which is a major component of your credit score.

I think I'd look at this a slightly different way: how much is having this HELOC open costing you?

- Time spent documenting your insurance

- Any fees associated

If it's still reporting in good standing, and it's not costing you much besides time, this is about as cheap a tradeline as you'll ever get.  If you're losing days of effort documenting it, or there's annual fees associated with it, I could see closing it... but if it's only costing you a few hours of your life every year, I'd just hold on to it and keep letting it help your scores.

As for general FICO advice, you'd need to post a lot more information than you have already (your credit lines, balances, installment loans, etc ad naseum) to actually get good responses, but you state your score is a 799 anyway: there's nothing you *need* to do to improve your score any farther, there is no tier past 760 currently.  Personally, I'd just keep on doing what you're doing and enjoy the gold-plated status .

[RobertEG]

I assume that its CL is being included in your calcualtion of revolving % util?

If so, once it is closed with $0 bal, it will no longer be in the denominator or your overall % util., and thus loose its benefit in calculation of your overall % util.  You can manage the impact of that, but it will require paying closer scrutiny to your util of other accounts, which are currently having their utils reduced in indiv impact due to the high impact of the HELOC in overall CL.

Another factor, probably beyond your control, is whether, upon closing the acct, the creditor will choose to delete the entire acct.  If its age since opening is higher than your current average age of accts, and they choose to delete it, your AAoA will be reduced.  That's an easy one to calculate....

[Revelate]

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@RobertEG wrote:

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Another factor, probably beyond your control, is whether, upon closing the acct, the creditor will choose to delete the entire acct.  If its age since opening is higher than your current average age of accts, and they choose to delete it, your AAoA will be reduced.  That's an easy one to calculate....

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Learn something new every day: why would they delete the tradeline in this case Robert, vs. simply marking it as closed?

[RobertEG]

No, closing does not delete it.  They would have to report deletion of the entire TL.

Credtiors may have reason to do that.  Once the account is closed, they can thereafter avoid any and all issues over any prior credit reporting, such as disputes of accuracy of any information previously reported, by simply deleting the entire TL.   Close out their books, so to speak.  I am not saying they will, but many a consumer has been hit with an entire account deletion after making a simple GW request for deletion of a prior derog, thus impacting their AAoA.

[Anonymous]

Thanks for the responses!  Yes, it probably adds up to days of my time every year, because they "lose" my paperwork, and then they fight me over whether I have enough insurance.  If I do close it and my FICO score drops, what would I do to make it go back up, and how long would it take?  I don't want to do anything that would hurt my chances to get out of this tiny condo!    Thanks again.

[Revelate]

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@Anonymous wrote:

Thanks for the responses!  Yes, it probably adds up to days of my time every year, because they "lose" my paperwork, and then they fight me over whether I have enough insurance.  If I do close it and my FICO score drops, what would I do to make it go back up, and how long would it take?  I don't want to do anything that would hurt my chances to get out of this tiny condo!    Thanks again.

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Honestly, just suck it up if you're planning for a new mortgage.  Time to go back up is probably immaterial in this instance since it sounds like you want out of the condo as soon as possible.

You're in the top tier of every lender's baskets at the moment, unless we're talking years before your new mortgage, close that first, then worry about dumping the HELOC.  Why take the risk?  Over a couple days out of a 80+ year lifetime?  It's just bad math

[GregB]

Most of these responses are assuming that your 799 credit score is a real score like EQ Beacon 5.0 sold here. You could also be getting a real FICO when you reapply for the HELOC.

IF that is correct then it would seem like the HELOC isn't a big deal on your credit.

A good guess on that would still require more information from your credit report, specifically a useful on like the EQ FICO sold here. Trying to base a recommendation on the TU FICO 98 sold here would be much harder. Basing it on any other score would be impossible.