HELOC and Affect on Scoring

[Anonymous]

Hi,

A few years ago I took out my mortgage on a new home. The majority of it was a traditional fixed rate mortgage and the remaining was a seperate HELOC with my local community bank (who packaged the whole thing). I have been working down the traditional mortgage but thus far have just paid the monthly interest on the HELOC. Not using it...but also not paying it down as of yet given the low rates and other needs over that period.

I now realize that Experian (not Transunion or Equifax) have this listed as a "credit card" under revolving debt. As such it has my overall credit usage at 95% and is impacting my FICO.  If you take that HELOC and place it under a proper listing of Mortgage the revovlving credit/credit cards should drop to below 28%. Possibly why my score is 40 points higher with both Trans and Equifax.

I have disputed this with Experian for two months and get no response. I contacted my bank and they said it has to come from Experian...they just report it and don't classify it (which makes sense since the others have it listed under mortgages).

If I had know this would happen I would have never taken out a HELOC as part of the package. Does anyone have any experience with this? Any outcomes if so?

[Anonymous]

HELOCs are revolvers, so it seems correct. This'd also happen if you used a Line of Credit (think PLOC). While it isn't a card, it's a revolver, not installment.

HELOCs aren't mortgages, nor are they installment loans, so they affect your revolving UTI.

https://www.investopedia.com/mortgage/heloc/home-equity-vs-heloc/ 

If you aren't applying for more credit, the points shouldn't matter too much in the short-term.

You can also request CLIs on your other current revolving lines, or open new ones, to increase your TCL, which'd bring down your revolving %.

[Anonymous]

Thanks. I have already taken those steps. I have increased the credit line on two cards and have most paid down to below 10%. But this will only put a small dent in the total as the Heloc will take years to get down to below even 80%.  With that, ironically, I am trying to get a refi so as to get out of the HELOC and get one conventional mortgage that I can pay down faster at lower rates.

Of course, no one warns you of this when you get into a HELOC. That it could end up trapping you later on from qualifying for a refi due to the credit utilization.

[K-in-Boston]

A HELOC is a revolving line of credit.  However, the utilization isn't really factored into scoring at a certain dollar amount (which if memory serves me correctly is around $75-100k) as if it were a maxed out credit card.

[Anonymous]

Mine is $219K. It was used to bring the rest (conventional mortgage) under the jumbo rate and which has been paid down considerbaly.  The HELOC absolutely is showing as a maxed out credit card debt and quite clear that I am using some 90% of my available credit as a result. Even so far as saying that the suggested course for raising my score is to lower that 90% to below 30%. Which, would take me years. C'mon, it's a mortgage!

[K-in-Boston]

Yours is larger than mine and mine does not factor into the revolving credit part of my scores.  Just to be clear, when you mention Experian are you looking at the account through Experian credit monitoring, or at your actual Experian Credit report?   Experian's front end lists mine along with all of my credit cards, lists the balance along with my credit cards, and shows a utilization percentage that includes the HELOC - however, the balance itself isn't being used to really caliculate my FICO scores.

Take a look at your actual report (or drill down to the account details at Experian.com) and it should be listed like this:

As long as it doesn't say it's a revolving credit card, and looks similar to that you should be fine and should look for other differences between your reports to find out why there is such a disparity in scores.

And just to make sure, when you mention your TU and EQ scores being higher, those are definitely FICO 8 scores and not from Credit Karma or similar that use VantageScore 3.0 scores?  If I view my accounts on Credit Karma, the HELOC is shown under Real Estate.  While for sorting that makes sense, it is a Home Equity Line of Credit which by definition is a revolving credit account.

[Anonymous]

Thanks for taking the time to think this through with me! A few minds are better than one, definitely mine is weak when it comes to this stuff.

First, I am viewing Experian via the paid portal that includes all of my varying FICO scores. As well, it offers me the many different FICO scores (FICO8, auto, etc). In this, Experian lists the HELOC as a revolving debt and, with suggested ways to increase my score suggests I need to pay down from 90% utilization (which is almost entirely the HELOC). I see nowhere that this being noted as a mortgage. And it's fairly clear that it's included as my total revovling dept balance.

My Fico 8 Score, according to Experian, is still 40 points less than Exquifax and TU. Again, Equifax and TU are both clearly showing the HELOC as a mortgage. Under no circumstance is Experian (which I think is far more tied into FICO than the latter two).

I am learning, so please give me your thoughts otherwise!

[K-in-Boston]

You are very welcome.  I really think it's just a matter of cosmetic differences with how Experian is showing the data and making suggestions.  I don't have the paid subscription for Experian, but when I log into my free account, I do see my HELOC factored into credit usage.  If I click the improve your credit tab, I get:

Reduce Your Balance
The FICO® Score Simulator can help you see how your actions may impact your FICO® Score 8. What could happen if you reduced some of your $xxx,xxx credit card balance?

That 6 digit number is (thankfully) NOT really the same as my revoling credit card balances!  If I click Reports & Scores, under Debt Summary that number is lumped in with "Credit card and credit line debt."  Again, it's showing it there, but FICO 8 doesn't count a HELOC like a revolving credit card except for smaller line amounts.  Scrolling down to where each of my accounts are listed, my HELOC is listed under Credit Card and Credit Line Accounts and not under Real Estate Loans, which is correct.  Then if I click the arrow next to it, it expands the details and next to Account Type I see Home Equity Line Of Credit - Revolving Terms, which is also correct.

• Please look at something showing your individual accounts as they appear on Experian (Reports & Scores tab on experian.com for instance) to see the details of your HELOC account and let us know what it says there for Account Type.
• Are you getting FICO 8 scores for Equifax and TransUnion from this same Experian account?  If not, where are they coming from?

[Revelate]

 27K HELOC in my case, and also when I had it maxxed out late 2018 FICO 2 screamed FICO 8 didn't even hiccup.

https://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/All-revolvers-zero-testing-HELOC-Amex-ch...

Look under the account type:

Account type: Home Equity Line Of Credit - Revolving Terms

That's mine on EX.  It's also listed under Credit Cards in the EX CMS but that doesn't mean anything TBH to scores.  What'd your scores do before and after the HELOC reported?

[kdot]

I have a 760 EX FICO (credit monitoring on 2 different CCs and my CU). No derogatories, no lates...nothing!  Good DTI.  Cred utilization in my CCs is 10-15%.  This is where it gets interesting:  my Vantage score is 704 on CK and Cap One.  Nav seems to think that I have terrible personal finances and suggests I get a credit-building CC???  I just applied for a Chase FU and was denied. Called recon line.  Was told my "debt to credit ratio" was 80%.  Hmmm...this has got to be related to my HELOCS...an old one beyond the draw period and another maxed out with draw period ending in May 2021.  Both paid on time forever.  How in the world is HELOC debt considered the same as CC debt??? It is secured by Real Estate...it is not unsecured CC debt!! But, it seems to have the same impact as irresponsible CC usage...despite being always current and paid on time based on the initial payment arrangements!  So...is Chase the only CC company that uses HELOCS (in good standing) as an opportunity to deny credit???  Is there any recourse...this is real estate debt which, frankly, is long term and will (by design) take years to pay to down to sub-30%...am I destined for no new CCs as long as I have the HELOCS???