Secured debt (HELOC) vs Unsecured debt (credit card)

[Sue J]

I'm fairly new to the forum and I was just reading one of the topics here about credit card debt.

We had paid off our regular mortgage with a HELOC (Home Equity Line Of Credit) in 2003. We went from a balance of $20,000 7% fixed mortgage to a $30,000 HELOC at 3.5% variable . We needed the extra $10,000 for some repairs and a much needed bathroom renovation.

By 2006 the HELOC balance was down to about $17,000 but the rate had climbed to $7%.

I get lots of credit card offers all the time. My shredder is very well used. But one offer was from Capital One for a no fee balance transfer with a rate of 2.99% for a year, dropping to 1.99% until the balance transfer is paid.

I called and asked many questions about this. No balance transfer fee. No minimum purchases required. 2.99% for 12 months and then DROPPING TO 1.99%!

So we paid off our HELOC with a balance transfer from this credit card. We always pay at least the minimum and never use this card for any purchases. In a few months the rate will drop to 1.99%.

So far I haven't seen any downside to this, even though it seemed almost "too good to be true".

But my question is, what does this do to your FICO score? I hated to put $17,000 on a credit card, but the rate sure beat the climbing variable HELOC. The balance is now down to about $12,000 and I'm in no hurry to pay this off, especially when it drops to 1.99%.

So I'd like to know if moving debt from a HELOC to a credit card has any negative effect on a FICO score.

Thanks.

Sue J.

[cute fuzzy bunny]

I would tend to doubt that it'd have any significant effect.

In fact, it might have increased your score if you didnt close the HELOC but its still there with a zero balance. By opening the credit card, you increased your available credit line without increasing your debt load, thereby making your debt to available credit line ratio lower, which is a factor in FICO.

[jazz4cash]

I think you should post your question on the forum at this site:

http://www.creditinfocenter.com/

Most of the folks over there are doing credit repair, but there are some very knowledgeable people over there.

I expect it WOULD negatively impact your FICO, but it really depends on several other factors. Revolving debt like credit cards is more significant than secured debt. Also there is apparently something about the way that Credit One reports to the credit bureaus that make them very unpopular with the FICO watchers. I would think the impact to your FICO may not matter unless you need new credit or have several other lines. You should probable check into getting a free annual report from each bureau that all consumers are entitled to. It will include some explanations for how your various accounts affect your FICO.
That does sound like a pretty good deal rate-wise....good luck Sue

[Sue J]

Thanks for the responses. I do check the free reports during the year but they don't give you a FICO score unless you pay.

But I'll make a point of getting an actual score next time.

[jazz4cash]

BofA and others often have $1 trials that include at least a one bureau score

[thefed]

Originally Posted by jazz4cash

BofA and others often have $1 trials that include at least a one bureau score

those are often referred to as FAKO scores because they dont accurately represent the scores a mortgage co. or auto dealer would see...


what was your total credit limit available on the card you took to 17k? I'd guess it will hurt you until you are under 50% utilization with that card... something like that. and it'd help if you left the HELOC open too...

[Sue J]

Originally Posted by thefed

what was your total credit limit available on the card you took to 17k? I'd guess it will hurt you until you are under 50% utilization with that card... something like that. and it'd help if you left the HELOC open too...

Yes, we left the HELOC open. We kept it open just in case we needed something major for the house.

The total credit limit on the Capital One card is $30,000 and we are now at $12,000.

And since I posted the question another card offered me a free 30 day trial on one of their "Identity Monitor" services. It includes a credit report with an actual FICO score. I already made a note on the calendar for the date to cancel it so that I don't get charged the monthly fee.