HELOC and Affect on Scoring

[Credit4Growth]

@kdot 

You wrote:

How in the world is HELOC debt considered the same as CC debt???   and also debt to credit ratio" was 80%.  

👋

HELOC debt, Mortgage debt, Auto debt, Secured CC debt is all secured by something... yes, I think most agree to that.

What you maybe misunderstanding is the importance and weight of DTI plays in credit decisions.   DTI correlates or indicates your ability to repay.  So without a lot more details provided by you, I will give a rough example of why Chase and other ma have decided to decline your application and may continue to.

Let us say person A whose name is Henrydot, he has an income of 2150K annually.

Let's say he has 2 average size mortgages, 3 auto loans, a small amount of student loans left (maybe only 8K) and 2 HELOC's with balances (both HELOC's are past the draw period) and additionally Henrydot has a personal loan with only 2 or 3 monthly payments remaining... yada yada, there could be better or worse minor details.

I am going to ball park the following as well, so do not rag on me (I am broke person and do not generate an income anywhere near this as well I will guess the tax amounts)

Monthly take home pay is in between 12k- 13.3K

However, what Chase is eluding to, your monthly obligated outgoing payment is already approximately the same/equal to 80% of your Gross monthly pay (that is before taxes).  

Even in the higher income earner scenario, without a great tax advisor/education of tax advantage filings strategies, I would tend to  believe most in this income bracket will still pay at least 20% of income to the 'tax man'. 

😏In this scenario, you are considered risky because because basically all of you income is already committed to your current obligations which you probably already signed agreements to repay and remain in good standing on those account.  

They, FI do not believe you have indicated to them additional income or assets to a satisfactory level of comfort where them may want to contract with you and be convinced you can repay even if Henrydot hits a financial downturn...

DTI is way to high 80% is considered next to maxed out and super risky, whether obligations are secured by an asset or unsecured like a personal loan.  The expectation of a monthly payment is still to meet and usually agreed upon by all parties involved. 

The above is just  opinions and I am not familiar with any persons named Henrydot!  🙄

Different lenders may have different guideline and consumers usually sign with agreement to them..

I can think of 2 thing to attempt which directly affect DTI: 1 - lower monthly obligations or 2 - increase income

¡Ciao!

[kdot]

Yes...thank you for the info.  I do understand DTI.  My DTI is fine.  What Chase referred to as problematic was my debt-to-credit ratio...not DTI.  And again this has got to be due to the HELOCS because my CC utilization is well below 30% but the HELOCS have been used...

[Thomas_Thumb]

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@Credit4Growth wrote:

@kdot 

You wrote:

How in the world is HELOC debt considered the same as CC debt???   and also debt to credit ratio" was 80%.  

👋

DTI is way to high 80% is considered next to maxed out and super risky, whether obligations are secured by an asset or unsecured like a personal loan.  The expectation of a monthly payment is still to meet and usually agreed upon by all parties involved. 

The above is just  opinions and I am not familiar with any persons named Henrydot!  🙄

Different lenders may have different guideline and consumers usually sign with agreement to them..

I can think of 2 thing to attempt which directly affect DTI: 1 - lower monthly obligations or 2 - increase income

¡Ciao!

---

I do like the strategy of higher income - although that won't help credit score!

*** The below was edited to address my confusion from mixing up elements of the OP's posts with kdot's posts ***.

As far as @Anonymous 's issue: Low Experian Fico score due to HELOC being incorrectly coded.

- File a dispute with Experian and include a letter. Describe the issue you are having with their coding the HELOC as revolving credit. (an artificially high calculated revolving credit utilization, above 90%, which is hurting your credit rating. Mention that TU and EQ are coding the HELOC. Include a screen shot in your letter that shows how TU and EQ are coding the account as a loan whereas EX has it as revolving.

- Call Experian and tell the CSR you have a difficult issue and need to speak to a manager. Tell the manager you would like to send Experian a letter with some background information. Ask for an address and name. [No harm sending a letter with the dispute and independently to a 2nd contact]

As far as @kdot 's issue - denial of credit cards by Chase due to having a large HELOC, the true reason for the denial could be different from what you are being told. A high debt to credit ratio (above 80%) does refer to current balance/original line of credit. It is unclear whether Chase is looking at this account as revolver or installment loan. A HELOC of that magnitude should be treated as a loan for Fico scoring purposes but, lenders can evaluate risk differently.

1) Consider applying for a card thru a couple credit unions and/or a couple other banks. Look for institutions that offer a pre-qual process which does not require a HP.  Worst case, a couple HPs are not a major hit. - Have a conversation with the potential CC issuer on coding of the HELOC ahead of time.

2) Home equity loans are not subject to being considered revolvers. They are pure play installment loans. Would there be a benefit if your current lender could convert the home equity line of credit (HELOC) to a home equity loan (HEL)?

[kdot]

????????

The issue is debt to credit (credit utilization)....not DTI.  My DTI is good!

[Anonymous]

I believe the experts said HELOCs don’t figure into version 8. Has to be miscoded. 

[Credit4Growth]

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@Thomas_Thumb wrote:

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@Credit4Growth wrote:

@kdot 

You wrote:

How in the world is HELOC debt considered the same as CC debt???   and also debt to credit ratio" was 80%.  

👋

DTI is way to high 80% is considered next to maxed out and super risky, whether obligations are secured by an asset or unsecured like a personal loan.  The expectation of a monthly payment is still to meet and usually agreed upon by all parties involved. 

The above is just  opinions and I am not familiar with any persons named Henrydot!  🙄

Different lenders may have different guideline and consumers usually sign with agreement to them..

I can think of 2 thing to attempt which directly affect DTI: 1 - lower monthly obligations or 2 - increase income

¡Ciao!

---

I do like the strategy of higher income - although that won't help credit score!

As far as @kdot 's issue - difficulty getting cards due to a large home equity line of credit counting as a revolving account resulting in a aggregate utilization above 90%:

1) Experian should be coding that as a loan, not a revolver given the amount is North of $200k. Recommend writing them a letter requesting a re-code and mention TU and EX list it as an installment loan. Also, call Experian and escalate the issue.

2) Home equity loans are not subject to being considered revolvers. They are pure play installment loans. Can the lender convert the home equity line of credit (HELOC) to a home equity loan (HEL)?

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Thank you @Thomas_Thumb  i do now understand this is not a DTI issue after a few more post were made.  I was trying to give another perspective on how he appear to be maxed out to lenders and focus less on attention o his FICO scores because they within a good range.   My mention of attempts at addressing / increasing income and lowering monthly obligations related purely to DTI.

At this point the OP has nailed down the concern and expressed the issue clearly, to my understanding.  I have only been shopping for HELOC's.  I have never obtained one so this topic is clearly beyond my experience.

@kdot I wish to apologize for any confusion on my part or undue frustration I may have caused upon you!

I hope that with the assistance of members with HELOC experience you can soon reach a better outcome and approvals to resolve this and have your needs met.