|
 |
|
 |
|
BEWARE OF THE HELOC!!!! Many lending institutions will offer a HELOC(Home Equity Line of Credit) and secure a second or first mortgage against your property. Since it seems to be a credit score driven society we think that it is important for the public to realize that banks like Bank of America and their subsidiary(Countrywide ) will rate this on the credit bureau as revolving credit. Your credit score is driven by the available credit you have so the more available credit that shows on your report the better your credit score can improve. For example if you have a line on your credit card of $10,000 and this represents the total revolving credit you have and you owe only $2,000 on that line or your pay it off monthly you will have a far better score than somone who has a balance of $6,000. The total useage in the latter example is 60% and subsequently this can drive your score down drastically. I have had long conversations with Countrywide Mortgage with respect to how they rate HELOCS. Apparently they choose to report these as revolving credit which could have tremendous impact on your score if this HELOC is used to capacity. I had several challenges whereby Countrywide closed the lines of credit(regardless of the client's impeccable history) without the clients authorization. The public may be unaware that the lender can do this without any recourse. I contacted the Credit Bureaus and was told they would be happy to rate these as mortgages as long as the lender reports it to them this way. After all these are in fact mortgages. These HELOCS were offered as an alternative to PMI. Countrywide told them that this was a far better beneficial path than to obtain PMI. In fact is was far less advantageous for the following reasons: 1) A Heloc is tied to an index that can go up and is not fixed. Therefore the payment can go up. 2) Since Countrywide rates these as "revolving credit" it is often maximized at closing and will damage a borrowers score. If the bank closes the credit line they do not have the ability to "draw on this line"and can result in lowering their credit score. Since your credit score can determine what rate or program you will receive or even determine if you get credit , this can seriously damage your credit and prevent you from obtaining loans or additional revolving credit due to the "high useage" even if you have impeccable credit and very low balances on your credit card. Instead if you are trying to avoid PMI consider asking your broker or lender for a fixed rate second mortgage. The rate may be slightly higher but it will report as a mortgage and not revolving credit. The rate will not go up, the payment will be constant and it will be reported as a mortgage as it should be. This will help you maintain a stronger credit score and you will not be at the mercy of Countrywide or Bank of America when they unilaterally decide to close your line. We offer free credit coaching and we help our clients navigate through these uncertain times of turmoil. Give us a call I promise you will not be sorry!
MGM FINANCIAL CORPORATION - 1531 E. Main Street - Duncan, SC 29334 Office Phone: (864) 486-8000 Fax: (864)-721-2998 Cell Phone: (864) 431-2314 Toll Free Phone: 1-866-MGM-1FIN
We lend in the following states: SC © 2010 Myers Internet All Rights Reserved Powered by: Myers Internet | Admin Login |
