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.
