12k in CC debt worse than 20k HELOC on credit report?

[ShaneMcKenna 0]

I am researching paying off my $22,000 HELOC with $10,000 cash and putting $12,000 on a 3% interest credit card. (for the life of the balance)

 

The advantages are my interest rate is 1/4th with the cc as it is HELOC, and I will be paying a total amount of $575 in interest over 3 years! (now I pay $250 a month and that is interest only) I will be set to have it paid off in 3 years vs paying Interest Only on my HELOC.

 

The downsides are it is a credit card and I know most credit card companies aren't in business to "save you money". So you will need to be cautious. I have never missed a payment and I am setup for auto debit, so I don't see defaulting on the 3% and jumping up to 25% being an option.

 

My only question is does $12,000 in Credit Card debt look worse on your credit report than the current $20,000 HELOC?

I know the credit report looks into debt to income ratio correct? So they will take the balance of each credit card and multiply it by 2 or 3% to get the minimum payment, and that is a monthly debt correct?

 

In general, will doing this and saving thousands in interest and gaining equity much quicker be harmful on my credit until I get my balance back down to $0?

 

Thanks much,

Shane

[MichaelC 160]

Good question, Shane, and one I would be interested in knowing the answer to. FICO scores are somewhat of a mystery. Why not go directly to the source and see if someone here can give you the answer?

[sdkone 0]

So where can I get a CC with a 3% interest rate

[deu12000 0]

That's probably an introductory rate or special balance transfer rate (that is good until the transferred balance is paid off).

[West Coast Girl 1]

My only question is does $12,000 in Credit Card debt look worse on your credit report than the current $20,000 HELOC?

 

I know the credit report looks into debt to income ratio correct? So they will take the balance of each credit card and multiply it by 2 or 3% to get the minimum payment, and that is a monthly debt correct?

 

In general, will doing this and saving thousands in interest and gaining equity much quicker be harmful on my credit until I get my balance back down to $0?

 

Thanks much,

Shane

 

Shane,

 

I would ask Suze Orman http://www.suzeorman.com/. She's a financial Guru that has her own show on Saturday nights.

 

Good luck!

 

WCG

[Rich_in_CT 0]

So where can I get a CC with a 3% interest rate

Amex offers a lot of cards with intro rates on balance transfers in the 2-3% range.

[copia 0]

We use a second mortgage or Home Equity Line of Credit and convert it into a mortgage checking account or MCA. You don't have to refinance your first mortgage to make this system work for you.

Using a Mortgage Checking Account and using the interest free features of a credit card, we can help you pay down your consumer debt and your mortgage faster than you ever thought possible.

 

A Mortgage Checking Account (MCA) leverages ALL of the idle money in your checking account every day of the month. Whenever you deposit money into your MCA, the money is automatically applied toward the balance of your home loan saving you money on the daily calculated interest that you are charged.

 

When you need to pay your necessary expenses, it comes back out at that point. In the meantime, it has helped reduce the interest accumulating on your home loan.

 

If this sounds like something you would be interested in email me for more details......

[jimculler 0]

The answer is it depends on your balance to limit ratio.

 

If the HELOC is a 20k line and you owe 20k it is worse than a 12k cc debt on a 20k credit line.

 

In other words, if the CC line is going to be well above and beyond the balance, it will be more beneficial for your credit report than the HELOC is if its maxed out.

 

Also if you leave the HELOC open and have that credit available, your scores will increase even more because the credit is available and not being used.

 

You will have to charge something at least once every 6 months in order to keep a trade line reporting as active. If a trade line goes inactive its not beneficial for your credit.

[ShaneMcKenna 0]

The answer is it depends on your balance to limit ratio.

If the HELOC is a 20k line and you owe 20k it is worse than a 12k cc debt on a 20k credit line.

In other words, if the CC line is going to be well above and beyond the balance, it will be more beneficial for your credit report than the HELOC is if its maxed out.

 

Thank you all for the advise. This is an old post, and now I have the cash to pay off the 2nd mortgage which is at $20k.

The interest rate is 7.5%, so I am excited to pay off the $20,000 and simply have 1 mortgage.

 

Again, I did an 80% 1st and 20% 2nd to avoid PMI. Now I will have just a 1st of $130k which is 6.5%.

 

Thanks again for the help,

Shane

[<Steve> 82]

Congratulations! on paying off your debt!

 

Seems like that is how the 80/20 splits should work.

[jimculler 0]

You're welcome. I will check the dates more often now.

 

FYI, balance to limit ratios make up 30% of your credit scores. I have seen clients with deep and old active trade lines that have never missed a payment. Once these clients run up their cards, the scores almost always will dip below 700, which is big in todays market for rates and programs.

 

I typically encourage these clients to request balance limit increases from their credit card companies, and if this doesent help then get new credit lines that they are instructed not to run up without paying off.