Some great information from a good friend and excellent Senior Loan Officer at Legacy Mortgage, Bess Daunis. Please don’t hesitate to contact her or me with any of your borrowing questions.
As a Lender, I see way too many clients with perfect pay histories yet low credit scores. Since mortgage interest rates are now impacted heavily by your credit score…. this can be very valueable information for you.
The Fair Credit Reporting act requires reporting agencies to report true and accurate information. A HELOC is not a revolving account but is very often reported that way. When a HELOC is reported as a revolving account, your clients should 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.
Senior Loan Officer