HELOC same rules as standard credit? - Tilted Forum Project Discussion Community

Stompy · 12-22-2004, 01:01 PM

I went and applied for a Home Equity line of credit the other day and got approved.

I originally wanted a loan, but the woman said to me that the line of credit was better because interest was based off of prime.

So then I asked her, "Well, if I use up the max of the line of credit, then won't that hurt my score since you aren't really supposed to use more than 50%?" She said, "No, because it's no the same as a credit card."

However, my friend here is telling me that it WOULD hurt my score.

So... any idea which it is? I'm using the line of credit to buy a new car since I can write the interest off on my taxes, so the whole amount will be used up immediately.

BonesCPA · 12-22-2004, 01:27 PM

A HELOC is a loan against your home. When the loan/line is approved, etc. then the entire amount approved is essentially considered borrowed for recording purposes - with county, etc. As far as your credit score goes, I don't believe it should make a difference against if you have $1 owed or $100,000 on the line. If you are applying for other credit, they will ask you your debt amount at that time, and that will be relevent at that point. But just by borrowing more/less against the line it should not affect your credit score. And besides, unless you owe other debt that can change rates based on your credit score, what difference does it make on a temporary fluctuation of your credit score?

12-22-2004, 01:01 PM	#1 (permalink)
Stompy Banned from being Banned Location: Donkey	HELOC same rules as standard credit? I went and applied for a Home Equity line of credit the other day and got approved. I originally wanted a loan, but the woman said to me that the line of credit was better because interest was based off of prime. So then I asked her, "Well, if I use up the max of the line of credit, then won't that hurt my score since you aren't really supposed to use more than 50%?" She said, "No, because it's no the same as a credit card." However, my friend here is telling me that it WOULD hurt my score. So... any idea which it is? I'm using the line of credit to buy a new car since I can write the interest off on my taxes, so the whole amount will be used up immediately. __________________ I love lamp.

12-22-2004, 01:27 PM	#2 (permalink)
BonesCPA No. It's not done yet. Location: sorta kinda phila	A HELOC is a loan against your home. When the loan/line is approved, etc. then the entire amount approved is essentially considered borrowed for recording purposes - with county, etc. As far as your credit score goes, I don't believe it should make a difference against if you have $1 owed or $100,000 on the line. If you are applying for other credit, they will ask you your debt amount at that time, and that will be relevent at that point. But just by borrowing more/less against the line it should not affect your credit score. And besides, unless you owe other debt that can change rates based on your credit score, what difference does it make on a temporary fluctuation of your credit score? __________________ Back into hibernation.