Understanding Line Of Credit

My husband and I bought our house 2 years ago. It is our starter house and we anticipate moving out in the next 3-4 years. We are having a sewage system put into our neighborhood and must pay a $3900 tap in fee in addition to the amount it will cost to pay a plumber to dig a line from our house to the sewage system. We are looking at about $6000 that we do not have readily available.

Along those same "home improvement" lines, I would like to renovate our kitchen. I thought that it might be a good time to look into a home equity line of credit to a.) help pay for our sewage and b.) help us pay to renovate our kitchen. I have only done a little reading on the home equity loans, and we can get a good rate from our credit union at 4.99%. I am wondering if we would get approved for $8,000, and is it a smart move to get the home equity loan?

First, always always check out 2-3 other banks and see what rates they will give you. It is a tough market out there and they are fighting for business - your business.

Second, I would need more details. Are you getting a fixed rate loan or a line of credit? There are two home equity loans out there. The fixed rate/lump sum and the variable rate/ line of credit that works like a checking account. A variable rate might do you well if you can pay it off this year. The rates are not going to sky rocket any time soon. But if it will take a while to pay back - a fixed rate might be better.

I can't tell if $8000 is good or not without knowing how much you paid for the house and how much the house is worth - otherwise known as your equity. Your loan to value is a necessary number in order to come with your rate and loan amount and whether it is a "good deal".

Of course, it is always best to save up the money and pay for things without borrowing. Have a goal of say $10,000 in a money market account and borrow from yourself. Then, pay it back to yourself in little chunks.

2008-07-14 19:01:31 by Elle C

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Our banker told my husband and me that we can use our line of credit on our current home to purchase the home we want to move to. He said we can close on the new home before we sell the old home. I don't understand how we can do that, as the line of credit is not big enough to cover the entire purchase price of the new home.

I'm guessing you'll be using your equity for the down payment and closing costs on the new place while your old place is on the market for sale.

Yes, you may have two mortgages for a while as you wait for the old house to sell.

You have to look at the RE market in your neighborhood. How long is it taking for houses to sell? Two weeks, two months, or 12 months? Ask yourself what you will do if it doesn't sell after 6 months? Will you rent it out?

If you're prepared for all this nerve racking then you could try to do what he says. However, if the thought of double mortgages makes you cringe, find a buyer for your place FIRST, then as soon as escrow opens for your buyer, find a new home. If you have a 60 day escrow that should give you enough time to coordinate two closes within a day or two of each other.

You move out, the buyers move in the next day. That's the best way to go if you don't want double payments.

2007-09-15 15:46:49 by lc1967

Price: $9.95 $9.95

I just turned 18 in march and i need to start a line of credit but have tried everything, i have been paying for a phone for nextel, and i have applied for Capital One Credit Cards, Discover, and many more. But i just can't understand why i can't get my Line Of Credit started, can anyone help?

Capital One and Discover are more or less for those that have established credit.
Try applying for a Sears card. They are a good starter card and will probably give you a $500 credit line or something close to that.
Make ALL your payments on time and dont use more than 25% of your credit line.
Sears owns "Discover" so keep good w/ Sear and you will more than likely get approved for Discover or Visa in as little as 6 months.
DO NOT APPLY FOR CREDIT OFTEN! The simple act of "applying for credit" lowers your credit score and creditors do not like to see multiple application on your credit file.
Good luck and be careful with your cards!! Only charge something that you have to cash to pay for and dont rely on "minimum payments" they will scr*w you! Pay the card in full each month. Lots of store cards have interest rates in the 20% +

2007-06-11 05:18:11 by Chris L

Price: $29.95

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I don't want an annual fee, just a decent credit line, i've had my capitol one credit card for 5 years now and my credit line is only $800.00 thats only after i threatened them i would cancel if if they didn't raise it (it was $500.00) i'm very good about paying off my credit cards, i don't understand why i have such a low limit with them, i have good credit, i have a citi card that has a $3500.00 limit, they keep raising my limit because i good with my payments

American Express has always been excellent on their CLI's. They started me out at 10K about 2 years ago. I am at 15K now. They allow credit line increases once a month should your score be over 710 and your income supports it.

Other places:

USAA (you have to be a member) -- My Line: $25K
Chase -- be careful .. they ratejack -- My Line: $15K

Places that don't:

Capital One: Same card for 5 years ... 1 increase --
cheesy limit $1800 -- I keep it open as it is one of my longest Trade Lines.

Discover: 1 increase of $500. My active line is $8500.

Good Luck !

2006-12-01 08:02:01 by AFwife

My wife and I are wondering how we should deal with each of our individual credit accounts. For ease of financial management we would like to reduce/consolidate credit lines. However, we understand closing credit lines could adversely impact our credit ratings. We don't want to do anything to reduce our individual ratings (both of us have credit ratings in the low 800).
Just another detail..My wife and I only use one card each, but have a several others. Our cards are paid off monthly so there is no revolving debt.

Unfortunately, you can't have it both ways - you can't consolidate/close some accounts and not have it affect your credit score. But the good news is that it won't affect your score enough to matter. With scores in the 800's (I assume you mean FICO scores, and not VantageScores), your scores would have to drop over 50 points before it would mean anything when applying for credit. And closing a couple of accounts won't cause that large of a drop unless they have large credit lines and you choose to keep a card with a small credit line.

That being said, there's no real benefit to closing any cards. If you use them a couple times a year, it's likely they will keep your accounts active. If you don't they may eventually be closed without you taking any action.

Don't forget that if you have cards in good standing that you don't use, you can attract some good offers from the issuers to entice you to use them, and you can use that to your benefit. Just last month I got a letter from Citibank offering me 3000 bonus Thank You Points if I would charge $300 on a card I don't use before the end of August. Those points are worth about $30 so I'm going to do it. Free money, right?

It's your decision but I would recommend keeping all your cards open. If you choose to cancel some, it's best to keep the cards with the largest credit lines open. You have high credit scores, and I don't know why you would want to change what you have done that got you there in the first place. Chances are those open accounts with no usage helped keep your utilization low which is good for your score.

2007-08-03 13:59:16 by STEPHEN M