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  1. #1

    Does utilization ratio on HELOC matter?

    Does the amount you draw from your HELOC matter as far as utilization ratio in the same way that a credit card does? Or is it treated more like a mortgage?

    We just opened a HELOC and I'm not sure how much it's okay to draw on it without having an overly negative effect on our credit scores.

  2. #2
    Home-equity lines of credit (HELOC) is considered revolving credit like credit cards and signature lines. It shows on your credit report as a revolving credit item and impacts your credit score as such.

    Keeping mind that installment loans like mortgages still factor into your credit utilization, revolving credit will carry more weight. Your credit utilization on revolving credit is calculated holistically and not on an account-by-account basis.

    For example, if you have $50,000 available on your HELOC and $10,000 available in credit cards, but you draw $15,000 from your HELOC and have no balances on your credit cards, your credit utilization ratio is 25% ($15,000/$60,000). It is not 30% ($15,000/$50,000).

    Experts say a credit utilization of 10% to 20% is good, just do not exceed 30%. Of course, you probably already know this

  3. #3
    Great. Thanks for the info.

    We have almost 100K in credit on our credit cards and carry no balances. We took a 35K HELOC and I immediately wrote a 15K check. So our overall utilization is about 11-12%. I think we're safe. Plus when we started the HELOC process, we both had perfect 850 FICO scores so even if it drops a bit, no biggie.



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