I have a home equity line of credit for $50,000. I have had it for five years and owe nothing on it. As I recently lost my job, that line of credit is a means to survive. My question is, do I try to grab all of it at once as a financial cushion, or would that send up red flags? Should I grab $45,000, and leave a little room at the top? Is that less obvious or less damaging for my credit score? Is there a different optimal amount to take? My equity in the house is conservatively $190,000.
Your question is particularly timely, since many lenders and creditors are clamping down on lines of credit that they deem too risky which these days is apparently everyone.
I have heard from sources who work for credit card companies that the government is requiring lenders and creditors to have cash on hand equal to, in some cases, 40 to 50 percent of the credit that has been extended. To the regulators, the fact that you haven't borrowed from your home equity line of credit up until this point doesn't mean that you won't eventually tap it to help you make it through a tough time, like a job loss.
So, if you have a $50,000 line of credit, the government might require your lender to have $10,000 to $20,000 in cash on hand, just in case you borrow against your line of credit and then default.
I'm hearing from creditors that these requirements for cash on hand are unsustainable, given how much credit everyone has been extended over the past two decades. So everyone's credit is going to be clamped down.
For example, if you have a credit card that you haven't used in 12 months, the lender may close it or reduce the amount of total available credit. We're hearing from thousands of Americans who have had their home equity lines of credit reduced or closed. Not only does this make it difficult to access the credit you've so carefully preserved, but it will also tarnish your credit score.
Credit experts say that 30 percent of your credit score depends on the credit you have available. Having less credit available (because the credit card company or HELOC lender has cut you off) will take some points off your credit score.
To your question: You have to tread delicately. If you don't take money out of your credit line, you may be one of those who end up having the credit limit cut and later regret that you didn't take the money out when you could. But taking a sizable amount of money without the means to pay back the funds can put you in a precarious situation.
Let's think about how this would play out: If you tap 80 to 90 percent of your line of credit, you will hurt your credit score at least a little. But if your credit line is cut substantially, that too might hurt your credit score, as you'll have less available credit.
Optimally, you'd never tap more than 25 to 30 percent of a line of credit. In your case, you'd only want to take $12,500 to $15,000 anything more than that could lower your score a little, depending on other factors in your credit history. But since you might actually need the cash, it's better to take it now rather than want it later and not be able to get it.
Just remember, this isn't play money. It has to last until you find a new job, and then you have to pay it back, with interest.
Remember, your home equity line of credit is tied to your house, so if you stop making the payments, you will put your house at risk of foreclosure.
Charlotte Mecklenburg Schools has posted four student assignment proposals for the new Mint Hill High School scheduled to open in fall of 2010.
The new school, located in the Clear Creek Business Park off Blair Road in Mint Hill, should help relieve overcrowding at Butler, East Mecklenburg and Independence High Schools.
Fannie Mae and Freddie Mac, the mortgage-finance companies seized by the U.S. government, will suspend foreclosures and evictions over the holidays.
The six-week halt will begin Wednesday, a day before the U.S. Thanksgiving holiday, and last through Jan. 9, the companies said in separate statements Thursday. The hiatus is designed to give servicers more time to implement a streamlined loan modification program for struggling borrowers.
It's a giant time-out, Paul Miller, an analyst at FBR Capital Markets in Arlington, Va., said. I wouldn't be surprised to see this across the board. For more information and help with foreclosures, go to foreclosure help.
Fannie Mae and Freddie Mac, the mortgage-finance companies seized by the U.S. government, will suspend foreclosures and evictions over the holidays.
The six-week halt will begin Wednesday, a day before the U.S. Thanksgiving holiday, and last through Jan. 9, the companies said in separate statements Thursday. The hiatus is designed to give servicers more time to implement a streamlined loan modification program for struggling borrowers.
It's a giant time-out, Paul Miller, an analyst at FBR Capital Markets in Arlington, Va., said. I wouldn't be surprised to see this across the board.
The Charlotte City Council Monday approved a rezoning bid for another high-rise tower along South Boulevard.
The approval came in spite of the recent controversy over the proposal. Residents of the nearby Arlington tower had complained that the new 230-foot-tall building would block their views of uptown.
But on Monday no one spoke against the proposal and the council passed it unanimously
