HELOC, Credit Cards, & FICO

I always wondered.  Is a HELOC treated the same way as other revolving debt like credit cards?  More specifically, if my HELOC limit is $100K, is my score adversely affected more when I borrow $95K then if I only borrow $30k?  Does the fact that the line of credit is secured with your real property?  Thanks in advance!

Dave

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Greetings Dave,

Answering in reverse order, ‘Yes’ a HELOC (or any other debt) closer to its ‘high credit limit’ will subtract more points from a FICO score than if the balance was closer to zero.  Craig Watts, spokesperson for Fair Issaac has been quoted as saying: “in all cases, paying down a real estate-based loan like a mortgage or a HELOC is going to help your score”.
 
Your second question is more of an oddity in that a HELOC may be treated by FICO as either a revolving or installment tradeline depending on the line amount.  A HELOC with a small credit limit will be treated as a revolving debt.  Empirical evidence suggests that amounts above $50,000 are in the safe zone (treated as installment) – any less and you run the risk of having the balance/limit ratio taking a larger toll on ‘Amounts Owed’.  MyFico.com dishes out 30% of the FICO pie to ‘Amounts Owed’ and describes the category as follows:

• Amount owing on accounts
• Amount owing on specific types of accounts
• Lack of a specific type of balance, in some cases
• Number of accounts with balances
• Proportion of credit lines used (proportion of balances to total credit limits on certain types of revolving accounts)
• Proportion of installment loan amounts still owing (proportion of balance to original loan amount on certain types of installment loans)

Great questions – thanks!

Paul