Real Estate

"proper" HELOC usage and credit rating?

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  • Aug 2nd, 2017 11:18 am
Sr. Member
Oct 17, 2007
517 posts
141 upvotes
Mississauga

"proper" HELOC usage and credit rating?

As far as credit rating goes, is it considered unfavourable to carry an outstanding HELOC balance for a long period of time? Is it calculated in the same way as credit cards?

I'm just curious, as it's not something I've given much thought over.
5 replies
Deal Addict
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Dec 8, 2010
2564 posts
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Revolving credit 'harms' your score while you use it. It's based on the monthly closing balance. If you pay it off one month, the 'harm' is gone from your credit score the next month.

Doesn't matter if you've had the debt for ten minutes or ten years when the statement closes and the balance gets reported to the credit bureaus; the impact on your score is the same.
Member
Jan 3, 2017
435 posts
417 upvotes
daverobev wrote: Revolving credit 'harms' your score while you use it. It's based on the monthly closing balance. If you pay it off one month, the 'harm' is gone from your credit score the next month.

Doesn't matter if you've had the debt for ten minutes or ten years when the statement closes and the balance gets reported to the credit bureaus; the impact on your score is the same.
Yes but I think he's asking how much does it harm it?

I believe the answer is negligible based on the fact that I have had a $220K Heloc with a balance of at least $190K for the past 4-5 years and my credit score is 761
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Dec 8, 2010
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fryguy1987 wrote: Yes but I think he's asking how much does it harm it?

I believe the answer is negligible based on the fact that I have had a $220K Heloc with a balance of at least $190K for the past 4-5 years and my credit score is 761
How much it changes the score is going to vary massively depending on all the other stuff you have going on.

If you have large amounts of available credit, using some of it is fine. If you start using 90% of what you have available, totally different.

It could be that your HELOC is posted as loan-type credit (mortgage, car loan) rather than revolving (credit cards... and AFAIK usually LOCs, both secured and not).

/shrug
Sr. Member
Oct 17, 2007
517 posts
141 upvotes
Mississauga
Thanks for the responses so far - I've sent a message to my bank's mortgage specialist... hopefully she can provide the answers.
Deal Addict
Jan 27, 2015
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Edmonton, AB
tezster wrote: Thanks for the responses so far - I've sent a message to my bank's mortgage specialist... hopefully she can provide the answers.
Your credit score is made up of the following:
35% - Payment History
30% - Amount owed (or credit utilization)
15% - Length of credit history (or average age)
10% - Types of Credit in Use (Revolving / Installment/ Other, and how many)
10% - New Credit (Credit Inquiries)

Your question pertains to the amount owed. Keep the amount owed to less than 80% and you'll be fine. Meaning, if you have (let's say) $200K in HELOC and numerous credit cards that total $20K, then keep the balance under $176K total and you will be fine.

For wanting a super high score (800+) then keep the utilization to under 20%. In the above scenario, keep the utilization to under $44K.

Note that any score over 760 is considered great and you'll get the best rates.

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