While it’s getting more difficult to qualify for home equity loans, Americans borrowed more of their home equity lines of credit than last year.
Consumers’ average credit score rose to 737, from 730 in 2006, according to the Consumer Bankers Association. Home equity lenders use credit scores in determining whether and how much of a home equity line of credit they’ll offer.
The average HELOC balance was $48,158 as of June 30, up 14 percent from 2006, CBA said.
The past few years homeowners have paid off higher interest credit card and student loan debt using home equity loans and lines of credit. While it did get them a lower interest rate, it changed unsecured debt to debt secured by their homes. If those homeowners cannot pay off those HELOCs or loans and have to file bankruptcy, their homes could be in jeopardy.
It’s become more difficult for those with not-so-good credit to get home equity loans and lines of credit. Lenders issued 13 percent fewer loans to those with FICO scores of 630 or less, according to CBA.
To check your credit score visit annualcreditreport.com. Federal law entitles you to one free credit report per credit bureau per year. You’ll have to pay extra to get your credit score (about $7.00), but if you are applying for a home equity loan or other type of credit it will be worth it to know what it is ahead of time.
Dec. 11, 2007.
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