Bad Credit Home Equity Line Of Credit

Bad Credit Home Equity Line of Credit







Bad credit can increase the difficulty that a homeowner encounters when seeking a home equity

line of credit. Bad credit can be the reason for a poor credit score.



What is a credit score? The credit score varies between the values of 300 and 850. The credit

score is the creation of the Fair Isaac Corporation. Lenders who arrange for a home equity line of

credit use the credit score in order to set the interest rate that will be charged the homeowner.



Homeowners with a low credit score will need to pay higher interest payments. A score above

700 is assurance of good interest rates. The credit score also serves as an indicator of whether or

not a lender should accept a homeowner's application for credit. Decisions on credit limits for the

homeowner are likewise based on the homeowner's credit score.



The credit score is a function of the homeowner's past line of credit. In the U.S., three different

agencies keep a record of each consumer's line of credit. Those agencies are Experian,

TransUnion and Equifax. If a homeowner with a low credit score wants to raise that score, then

the homeowner must contact each of those three agencies.



The effort to overcome a record of bad credit and to raise a credit score requires the contesting of

false claims that money is owed. If the homeowner can prove that the claim for money is spurious

then the homeowner has an opportunity to raise his credit score. This action should be taken if

the homeowner who plans to seek a home equity line of credit has a score less than 640. Such a

score would be a sign of bad credit.



The contesting of a credit score is not like a shot in the dark. A survey of credit reports in the U.S.

showed that 80% of such reports contained mistakes. Thus, a homeowner could have good

reason to question the credit score that is being used to determine the interest rate on a home

equity line of credit.



The credit score for a couple, a pair that are joint homeowners, is based on three credit scores

from the person with the most sizable income. This is the score that the homeowner needs to

make correct. Such correction may require a written statement to each of the above-mentioned

agencies. Those agencies will then contact the homeowner and indicate if more information is

necessary. If the homeowner is lucky, then the credit score will be increased and the interest rate

for the desired home equity line of credit will be lowered.



Once the homeowner has a good credit score then he will want to avoid slipping back into that

region of bad credit. This means that the homeowners must avoid the sort of spending that

carries them to the borders of their credit limits.