At a Glance

A Home Equity Line of Credit (HELOC) can be a useful financial tool for homeowners, allowing them to access funds based on the equity they have built in their homes. However, it’s important to understand how a HELOC can impact your credit score. In this article, we will explore the various ways a HELOC can affect your credit and provide tips on how to improve your credit using a HELOC while avoiding any negative consequences.

In this article, you’ll learn:



Is the current average HELOC interest rate.

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Impact of HELOC on your credit

A HELOC can have both positive and negative effects on your credit score. Understanding these impacts is crucial for managing your credit wisely.

1. Applying for a HELOC

When you apply for a HELOC, the lender will likely perform a hard inquiry on your credit report. This inquiry can have a temporary negative impact on your credit score, typically lowering it by a few points. However, the impact is usually minimal and short-lived. It’s important to note that multiple hard inquiries within a short period, such as when shopping around for the best HELOC terms, can have a more significant impact on your credit.

2. Using the HELOC

Once you have been approved for a HELOC, how you use it can affect your credit score. If you use the funds responsibly and make timely payments, it can have a positive impact on your credit. Making consistent payments towards your HELOC demonstrates responsible credit management and can help improve your credit score over time.

On the other hand, if you max out your HELOC or make late payments, it can have a negative impact on your credit. High credit utilization, which is the percentage of available credit you are using, can lower your credit score. Additionally, late or missed payments can be reported to credit bureaus and significantly harm your credit.

3. Closing the HELOC

Closing a HELOC can also affect your credit score. When you close a line of credit, it reduces the amount of available credit you have, which can impact your credit utilization ratio. If you have other credit accounts, such as credit cards, maintaining a low credit utilization ratio is important for a healthy credit score. Therefore, closing a HELOC may lead to a temporary decrease in your credit score, particularly if it was a significant portion of your available credit.

How to improve your credit using a HELOC?

While a HELOC can impact your credit score, it can also be used strategically to improve your credit profile. Here are some tips:

  • Use the HELOC responsibly: Make payments on time and avoid maxing out the available credit to maintain a healthy credit utilization ratio.
  • Consolidate high-interest debt: Consider using the funds from a HELOC to pay off high-interest debt, such as credit card balances. This can help lower your overall credit utilization and improve your credit score.
  • Establish a payment history: Consistently making payments towards your HELOC can help establish a positive payment history, which is a crucial factor in credit scoring models.

How can you prevent a HELOC from hurting your credit?

To prevent a HELOC from negatively impacting your credit, follow these guidelines:

  • Borrow responsibly: Only borrow what you need and can comfortably repay. Avoid maxing out your HELOC or taking on more debt than you can manage.
  • Make payments on time: Timely payments are vital to maintaining a good credit score. Set up automatic payments or reminders to ensure you never miss a payment.
  • Monitor your credit utilization: Keep your credit utilization ratio low by avoiding excessive borrowing against your HELOC. Aim to keep it below 30% to maintain a healthy credit profile.


If you have a HELOC but don’t use it frequently, it can still impact your credit score. The unused credit limit contributes to your available credit, which helps lower your credit utilization ratio. This can have a positive effect on your credit score. However, if the HELOC remains inactive for an extended period, the lender might choose to close it, which can reduce your available credit and potentially lower your credit score.

A HELOC can affect your credit utilization ratio if you borrow against it. As you use funds from your HELOC, the outstanding balance increases, which can raise your credit utilization ratio. It’s essential to manage your borrowing carefully to avoid maxing out the HELOC and negatively impacting your credit score. Maintaining a low credit utilization ratio is generally beneficial for your credit.

The minimum credit score required to qualify for a HELOC varies among lenders. While some lenders may consider borrowers with credit scores as low as 620, it’s important to note that higher credit scores typically result in more favorable terms and interest rates. Lenders also consider other factors, such as your income, debt-to-income ratio, and home equity, when evaluating your eligibility for a HELOC.

Obtaining a HELOC is typically easier and faster than getting a mortgage. HELOCs are secured by the equity in your home, which reduces the lender’s risk compared to an unsecured loan. The application process for a HELOC usually involves a credit check, income verification, and an appraisal of your property’s value. While requirements can vary, the HELOC process is generally less complex and time-consuming than a mortgage application.