How Does a Home Equity Line of Credit Affect Your Credit Score

How does a home equity line of credit affect your credit score? A home equity line of credit loan is actually a good way to build up your credit score, even if it is a little risky.

In fact, the risk is the biggest reason that you are able to build credit this way.

There are several factors that play into why a person would build credit from this type of loan, and they also contribute as to why this is one of the best types of loans to use to build credit.

Before you go any further, there is an important difference that you must learn between a home equity line of credit loan and an ordinary home equity loan.

With a home equity loan, you are given a bunch of money up front that you have to pay back over time.

However, with a home equity line of credit loan, you are only allowed a certain amount of money each month that you must pay back, much like a credit card.

So how does a home equity line of credit affect your credit score? Since the home equity line of credit loan happens over time, rather than all at once, it is better for building credit.
Creditors want to make sure that the people they loan money to will pay them back consecutively and can be responsible with their money, which by only taking a bit of money over time that you plan to pay back with interest, you show that you can repay back loans that you take out.

You can typically get a home equity line of credit loan without a very good credit score because of the risk that you are offering, the foreclosure of your home.

Offering up your home should you not pay guarantees the bank that you will pay off your loan no matter what, so they don’t have to worry about you defaulting nearly as much.

This allows you to open up a home equity line of credit loan, which lets you build credit pretty easily if you keep up on your payments and stay on top of things.

This doesn’t mean that you should rush into going out and getting a home equity line of credit loan because it can hurt your credit score as well.

Not only that, but you could end up losing your home!

There are a lot of risks that are involved, but they aren’t risky if you know that you can pay back what you owe without any problems.

If you aren’t sure if you will be able to, then you should wait until you are financially secure and have some money saved up in case of a problem.


1. Pay all of your payments on time in order to get a good credit score.

2. Only take out one loan at a time to build credit.

3. Although only paying the minimum payment takes you longer to pay back a debt, if that is all that you can afford, make the payment on time.

Many people at times, choose to not take their credit score and history as serious as they should. Your credit score and history are truly valuable and should be treated as so.

How does a home equity line of credit affect your credit score and history? You know what can happen now but ultimately if you have a definite way to return the money, you have nothing to worry about.



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