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Home Equity Lines of Credit and Your Credit Score

Now more than ever, you need to make sure you understand what's on your credit report – and you need to know what steps you can take to improve your score. For example, did you know that a Home Equity Line of Credit (HELOC) can impact your credit score quite dramatically – and sometimes unfairly – depending on how it is reported?

Here's What You Need to Know... and Do!
First, you need to know that HELOC's are commonly reported by the three credit bureaus as revolving accounts. In reality however, they do not fall under the typical revolving terms, even though they are set up in the same way as a revolving account. That's because HELOC's are secured by an asset.

Here's the Good News...
The Fair Credit Reporting act requires reporting agencies to report true and accurate information. So when a HELOC is reported as a revolving account, you can actually send a letter to the three credit bureaus asking them to change the type of account from "Revolving" to "Line of Credit" or "Other." This way, the account will not be rated by the scoring system using the "Balance to Limit" ratio scenario – which can drop a credit score by as much as 75 points if the HELOC is maxed out to the limit of the available credit line.

A Final Word of Advice
If you do decide to send a letter, you should send it as a Certified Letter, along with a copy of the HELOC agreement. You may have to send the letters more than once, but persistence is the key to accomplishing a positive result with the bureaus.



Are you looking to purchase a Texas home?  Perhaps you love your Texas home but would be interested in refinancing your Texas mortgage to a lower interest rate?  

I'll help you get pre-approved for your Texas home loan and even suggest some very knowledgeable and professional Real Estate Agents in your area of choice.  If you are available to talk, I am available to listen.  Give me a call or visit my website for more details.

Do you want to know all of your mortgage options? Call me today and let's discuss them further.

Texas Home Loan Consultant

Always available for your Texas Mortgage and Home Loan needs!

John R Cannata    P#214.728.0449

NMLS # 322646

Texas Home Loan Expert

Frisco TX Mortgage



The views expressed on this site are mine alone and do not reflect the views of my employer.

Comment balloon 17 commentsJohn Cannata • August 15 2011 08:37PM


Very nice information and tips.  Fun personal photo too on your blog!

Posted by Connie Goodrich, CRS ABR (McKinney Realtor)Texas (Keller Williams Realty) over 7 years ago

Hi John! Great blog post for consumers! Thanks for sharing!

Posted by Maggie McFarland, Pearland Realtor, Homes for Sale in Pearland Texas (RE/MAX Pearland - Maggie McFarland) over 7 years ago

Hi Connie - Yeah my picture is a little goofy. It was taken last year at the Daddy Daughter dance. :-)

Thanks for stopping by Maggie.

Posted by John Cannata, Texas Home Mortgage - Purchase or Refinance (214-728-0449 over 7 years ago

Hi John, thanks for sharing the input on HELOC's and credit scores.  It is a very important topic that many clients are not aware of.

Posted by Dan Edward Phillips, Humboldt and Del Norte Counties, CA (Dan Edward Phillips, Humboldt and Del Norte Counties, CA) over 7 years ago

Dan I appreciate the reblog of my post.

Posted by John Cannata, Texas Home Mortgage - Purchase or Refinance (214-728-0449 over 7 years ago

John  This is excellent information.  Iwas totally unaware of the impact of a HELOC

Posted by Karen Kruschka, - "My Experience Isn't Expensive - It's PRICELESS" (RE/MAX Executives) over 7 years ago

HELOCs can get so confusing. When I bought my last house, the HELOC amount showed up for the sellers and they said, "but we spent the money" not realizing that selling the house meant they had to square the debts.  Idiots...

Posted by Donna Harris, Realtor,Mediator,Ombudsman,Property Tax Arbitrator (Donna Homes, powered by JPAR - over 7 years ago

Thank you Karen. The type of credit line can play a large role in your overall score.

Donna - Thats pretty funny. I have run across that before when someone tried to refinance and do a Cashout Refinance. You cant have a cashout on top of a cashout. Sometimes people just forget they have a HELOC until you pull their credit and/or title work and find it listed somewhere.

Posted by John Cannata, Texas Home Mortgage - Purchase or Refinance (214-728-0449 over 7 years ago

HI John, a good piece of information to know; thanks for sharing.

Posted by Teral McDowell (Referral Patners LLC) over 7 years ago

John - Very interesting, I've never had an home equity line, so I didn't even know this was a possibility.  This is something everyone with a home equity line needs to investigate.

Posted by Michelle Gibson, REALTOR (Hansen Real Estate Group Inc. ) over 7 years ago

John, that's something I had never hear of! I helped a girlfriend of mine get a cash out that the same thing? I need to ask her how their credit report reads. Well, I learn something every day! Thanks for the info.

Posted by Deb Brooks (Brooks Prime Properties Wichita Falls Texas) over 7 years ago

Thanks Teral.

Michelle - Its not bad information to know, especially if you are considering a big purchase and need your scores to be higher.

Deb - Yes, a Texas Cashout is technically the same. However, a Texas Cashout should show up as a mortgage. I've seen this happen more with the 2nd mortgage being a Home Equity Line of Credit or just a Home Equity Loan. (the line of credit is like a credit card that uses your home as collateral and the equity loan is one lump sum amount).

Posted by John Cannata, Texas Home Mortgage - Purchase or Refinance (214-728-0449 over 7 years ago

John it is a shame should be on going classes about credit scores for anyone.  Once your turn 18 your entire life is based on scores !

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Posted by ~ Dallas Real Estate Agent Top Team (Dallas Houses for Rent Dallas Apartment Rentals ) over 7 years ago

Oops!!! I was here before, but I enjoyed rading it a second time


Posted by Karen Kruschka, - "My Experience Isn't Expensive - It's PRICELESS" (RE/MAX Executives) over 7 years ago

I really need to get my free annual credit report.  It's been a couple of years. 

Posted by Tammy Lankford,, Broker GA Lake Sinclair/Eatonton/Milledgeville (Lane Realty Eatonton, GA Lake Sinclair, Milledgeville, 706-485-9668) over 7 years ago

John, A great post.  HELOCs have been pretty common around here for someone wanting to purchase a lake lot to build on later.  Instead of a mortgage on the lot.

Posted by 1 ~Judi & Don Barrett & Chassy Eastep - Integrity, BS Ed, Integrity Real Estate Services -IDABEL OK (Integrity Real Estate Services 118 SE AVE N, Idabel, OK 74745) over 7 years ago

Lynn - I agree, there should be more classes available. Perhaps you need to be certified before being approved for a credit card or something (at least for the first credit card).

Karen - I appreciate you making a second visit.

Tammy - Its FREE! No reason not to pick it up.

Judi - Thank you for the repost. Makes sense to borrower against the equity they already built. Excellent reason to use a HELOC.

Posted by John Cannata, Texas Home Mortgage - Purchase or Refinance (214-728-0449 over 7 years ago