Have a Home Equity Line of Credit?Â Is it Impacting your CreditÂ Score Unfairly?
What You Should you Know and Do?
Credit reports have always been important, but theyâ€™ve grown even more important in recent years. Now more than ever, you need to make sure you understand whatâ€™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?
Hereâ€™s What You Need to Know... and Do!
First, you need to know that HELOCâ€™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. Thatâ€™s because HELOCâ€™s are secured by an asset.
Hereâ€™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.
If you need more information or help finding a lender or for any help with your Real Estate needs, you can reach me at Jenn@JenniferSellsOklahoma.com or (405) 625-1576.