Heloc: what credit limit to pick?

[Anonymous]

I just applied for and was approved for a HELOC.  I was looking for a 20,000 line and the lender came back with 55,000 after the appraisal. ( I am very happy that the house appraised higher than I thought).  I wonder if I should take a lower line of credit to help my FICO score.

My FICO scores are all in the 696-708 range.  I only have 2 credit cards(total limit is 6000) and %utilization is about %40.  I'm paying those down, trying to get under 10%, as has been recommended here.  I never used credit cards until the last 2 years, so I'm slowly building my credit scores

One thing TransUnion said on my credit score report was:

The available credit on your open revolving credit accounts is too low. [TransUnion]

I read that a HELOC below approx.  40,000 is treated like a CC and above that like an installment loan.

So, my question is should I ask the lender to give me a lower limit(so the HELOC will be treated like a CC) to help improve my FICO score.  I'm trying to get my FICO over 750.

Thanks,

Dave

[haulingthescoreup]

Hi, welcome to the forums! I think that you might have the wrong end of the stick.

It's not that it's treated like an installment loan above $40K or so. It's still considered revolving, but it's ignored for calculating util, just as are credit cards with crazy-high limits like $40K or above. (We're still guessing on the $40K, but it seems to be right around there. I know from my own reports that $50K HELOC's are excluded from util calcs.)

If you plan to use your HELOC, you definitely don't want a low CL, at least for scoring purposes. If you're putting on a new roof or upgrading your kitchen or paying college tuition with the HELOC, and you have an $18K balance, that would make a $20K HELOC look like a 90% maxed-out CC, and that would be a serious score-killer.

The higher CL would be better, unless there's some other factor like much higher interest, or you're afraid that you'll borrow against it too much. That way, if you're actually using your HELOC, you won't have to sweat having your revolving util skyrocket.