Revolving vs installment

[haulingthescoreup]

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@fused wrote:

Stop Moooooooaning!!!!!

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Don't worry, I'm back to mumbling. I limit my pity parties to 24 hours. Partly because I can't focus on misery long enough! Hee hee, you see, another advantage of ADHD.

[Anonymous]

I don't know I have seen some credit reports and they report the Heloc's as revolving and they were maxed out to 100%. So I don't know if keeping a low amount keeps it as rev and not installment. I also think that it depends on the creditors and how they report the account.

[fused]

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upitfast wrote:
I don't know I have seen some credit reports and they report the Heloc's as revolving and they were maxed out to 100%. So I don't know if keeping a low amount keeps it as rev and not installment. I also think that it depends on the creditors and how they report the account.

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Yes, your comments are true! Obviously, it more advantageous to have a HELOC reporting as an installment account. Just a whole lot less hu-hu!

[Anonymous]

I might have stumbled on some new information today. This is completely a guess but it could be investigated by those with LOC's. I noticed something on someone CR today. A credit card account changed how it was scored after CL went over $50k. No longer falls under revolving on this CR. Yet it isn't reported as an installment either. Still trying to figure out what is going on.

Could the $$ CL determine whether it is Revolving or Installment? CL greater than $50k, $75k, $100k, or something like that throw it in to an installment category?

You would need to figure out your UTL, and see if the LOC CL is added in to total revolving CL or ignored. That might help you identify if it is revolving or installment.

Here's a thread I started on a credit card that no longer is scored as revolving. Until I find another CR that shows the same thing it could also be a glitch.
http://ficoforums.myfico.com/fico/board/message?board.id=generalcredit&thread.id=53425

[hdporter]

What I suggested here a couple of weeks ago is that it's the outstanding HELOC balance, not the limit, that reportedly drives whether or not the line is scored as a revolving balance by FICO models. I've seen it indicated that the breakpoint may be in the range of $30K-$50K -- but there are no hard and fast guidelines in the articles I've scanned.

Also, a HELOC will likely always report as a revolving tradeline, no matter how it's scored -- that's the true credit relationship. Nevertheless, it can be ignored in the scoring of revolving tradelines for FICO purposes.

- Harry

[Anonymous]

I have a very similar situation that haulingthescoreup described a few months ago. I have a $48,000 HELOC. Although technically a HELOC, we actually use it as a home equity loan. It was obtained at the same time as the purchase of the house. So our util is almost 100%.

TU reports it as Revolving. EQ and EX report as Other
For account type, TU has Overdraft/Reserve Checking. EX has Credit Line Secured, Revolving. EQ has Revolving or Option.

I guess my big question is, is this a problem? Should I try to get TU to change? Is this hurting me? Do I dispute it with the lender or the CRA?

[Lel]

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@Anonymous wrote:
I have a very similar situation that haulingthescoreup described a few months ago. I have a $48,000 HELOC. Although technically a HELOC, we actually use it as a home equity loan. It was obtained at the same time as the purchase of the house. So our util is almost 100%.

TU reports it as Revolving. EQ and EX report as Other
For account type, TU has Overdraft/Reserve Checking. EX has Credit Line Secured, Revolving. EQ has Revolving or Option.

I guess my big question is, is this a problem? Should I try to get TU to change? Is this hurting me? Do I dispute it with the lender or the CRA?

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It depends on whether it has had an effect on your credit score. As you can see from the discussion before you, there seems to be wide variability in the way that HELOCs report, and variability in the effect that it has on one's credit score.

Did you check your FICOs before and after you obtained the HELOC? That might be the best way to see if your HELOC-reporting-as-revolving account is knocking down your score. Unfortunately, it's not going to be a straightforward comparison, because you'll also take a hit for having a new account. If your FICO scores didn't change much after the HELOC, then how it reports (revolving vs installment) doesn't matter in your case.

Personally, I'm very curious about the HELOC effect, as you can tell from some of my other posts on these forums. I'd like to refinance my current home equity loan (an installment loan) with a HELOC that has a lower interest rate at present. But I'm worried that if I do this, I'll have a new maxed-out line (about $100,000) that reports as revolving. Even though others have said that HELOCs over $50,000 don't seem to factor into utilization, I'm still concerned about a massive FICO score drop. I'm trying to preserve my score in anticipation of possibly refinancing my jumbo ARM, so I don't want to take any chances.

[haulingthescoreup]

One thing that can make you nuts is that they way they NAME a HELOC, or any other account, isn't necessarily the way that they actually treat it for scoring purposes. Since I usually have very, very low util, it wound up being easy for me to figure out that the HELOC was not being counted as revolving. Once I had a significant balance on it (around 15% - 20% util), I could look at my FICO score reports and tell from the posted util that it was not being factored in revolving. (whew)

Mysteriously, it seems that it is now being treated as revolving by TU. I don't know that that's all about, but I'm pretty upset about it. TU shows my util as being twice as high as the other two CRA scores.

A lot seems to depend on the credit limit. $50K, and maybe as low as $40K, will cause it to be treated as mortgage, or at any rate, not as revolving. Lower than that, and it's treated as revolving, which is bad news if you use it as intended to fix the roof or whatever. The only apparent solution is to raise the CL, or I suppose to pay it off, of course.

[Lel]

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@haulingthescoreup wrote:

Mysteriously, it seems that it is now being treated as revolving by TU. I don't know that that's all about, but I'm pretty upset about it. TU shows my util as being twice as high as the other two CRA scores.

A lot seems to depend on the credit limit. $50K, and maybe as low as $40K, will cause it to be treated as mortgage, or at any rate, not as revolving. Lower than that, and it's treated as revolving, which is bad news if you use it as intended to fix the roof or whatever. The only apparent solution is to raise the CL, or I suppose to pay it off, of course.

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Well, fortunately for you it doesn't appear that having TU report it as revolving has caused a negative effect on your TU FICO - it's about the same as the FICOs from the other CRAs. By the way, nice work getting your scores up to 700 again - that's some impressive gardening!

Wouldn't it be nice if the CRAs could give everyone a straight answer? But I guess that would be too much to ask.

There seems to be a growing consensus that high CL HELOCs might report as revolving but the CRAs' computers mysteriously treat them as mortgages or installment loans. So maybe if I were to take out a $100,000 HELOC and use it all to refi another loan, I won't see much of a drop (other than that which would come from having a brand-new account). But what would happen to my score if the balance on the HELOC dropped below $40,000 or $50,000? Would it suddenly count toward utilization?

Arrrgh. That's all I can say.

[Lel]

This weekend, I came across and article that seems to settle what everyone has long suspected about the way HELOCs are treated. In it, they quote Craig Watts, who works for Fair Isaac. This is what he said:

"The FICO score is designed to treat a HELOC rather like a revolving line of credit if the loan's limit is below a preset amount, and like an installment loan if the loan's limit is above that amount. We find that this is the fairest and most accurate way to incorporate HELOCs into score calculations."

The one thing that this doesn't clarify is just how high the loan limit has to be in order to be treated as a mortgage account. Based on individual experiences from folks on these forums, it appears that the threshold is around $50,000.

He goes on to say that utilization would have a "small" impact on one's credit score, and that this impact is determined by the rest of a person's credit history.


Sooooooo....based on this information, I decided today to bite the bullet, take my chances, and go ahead and apply for a HELOC with B of A. The current 4.99% interest rate (compared to my fixed 8% home equity loan) is just too hard to pass up. Hopefully, it will be a line for $125,000 (if the appraisal holds up), and I can pay off the higher interest rate loan. I'm putting my faith into the actuaries at Fair Isaac, and hope that this move doesn't cause my scores to crump.