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Dollars & Sense: Working a HELOC loan in your favor
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Posted by admin Thu Aug 31, 2006 13:39:11 PDT
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0 responses 0 comments Once again, thank you to those who responded to my last column on credit card payments. I really hope these techniques will help you, the reader and consumer, in your efforts to achieve financial security and success.

In fact, one of our readers wanted to know if the credit card payment strategy would work for a HELOC payment.  For those of you who do not know what a HELOC is, it is a Home Equity Line of Credit. This line of credit is based on the equity in your home to which the lender would issue you a checkbook or credit card and you could then write a check or charge the amount that you would need. You pay that amount back with installment payments.

Because this is a line of credit and not revolving credit, the credit card payment strategy will not work with the HELOC loan in order to help you increase your FICO scores. However, here is a technique that will help you increase your FICO scores with the HELOC loan program. 

As consumers, we have been trained and programmed to do certain things and one of the things that we are trained to do is to follow protocol.  This means that if I have a $100,000 HELOC loan and I need a minimum amount of $30,000 dollars to cure some issues that I have identified and deemed to be taken care of, I will borrow that specific amount to take care of those issues. If I need $30,000, then I will either charge or write a check for that amount. That amount will show up on my credit report as a $30,000 personal loan. However, I just hindered my FICO scores because now it looks like I only have a $30,000 Line of Credit and not a $100,000 Line of Credit. Thus, I am maxed out on this loan.

The best way to handle a HELOC loan is to charge your maximum amount that is available to you. Then at the end of 30 days, pay back $70,000 to your lender and take the other $30,000 to cure your issues.

Now what you have done is caused your FICO scores to increase because it looks as though you are only using one-third of the amount that is available to you. That is the truth, because the full amount of $100,000 is now shown from the beginning of the loan. It now looks as if you have borrowed your maximum amount and paid back nearly three-fourths of the loan after only 30 days. Thus, your FICO scores could increase 10 to 50 points by using this technique.

This technique can also be used with your American Express credit card. Consumers make a common mistake every month with their American Express credit card: we charge what we need and then we pay the full amount back. Just like the HELOC loan, the full amount is to be tendered to your credit card credit. However, most of the time we only charge a certain dollar amount every month, let’s say $10,000. When the case may be that I have $50,000 available to me and I only use $10,000 a month, that shows up on my credit bureaus.

Now it appears that I am maxed out every month.  But, if I were to max out that  American Express in the amount of $50,000, (first contact the credit card company to inform them that you are going to max out your credit line for about 30 days for business purposes, so they won’t flag your account) for this month, then charge our normal $10,000 for the following month, it appears you are only using one-fifth of the amount available to you, which is the truth. However, by not using this technique, none of your creditors know your true credit history.  You can also increase your FICO’s by  about 10 to 40 points by using this technique.

All of these techniques are designed to give your true credit history.  And, until now, most consumers have not accurately shown their credit history to creditors.

On Sept. 7 I will be having a credit and real estate seminar.  Cost is $5.  If you are interested in attending, e-mail me and I will inform you as to the time and place. I will talk about credit, corporations (Nevada versus California) and how to add two to five years of good credit on your personal as well as corporate credit report within 30 to 90 days. I will also discuss how to purchase property the right way, with no money down, and the three things you need to know to become a real-estate investor.
Remember that you too, can have good credit.

— Tony Grimes is a local, independent debt consultant.

If you have questions about credit or other financial issues, e-mail them to: Tonyatxfc@yahoo.com

We will consider running your question and his comments in a future issue of The Northwest Voice.

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