Taking out a home equity line of credit (HELOC) is now quite difficult. Those who planned to tap their equity are considering other borrowing options, such as credit cards.

A recent Associated Press article explains:

“Net home equity extraction fell nearly 60 percent from a year earlier to $205 billion in the first quarter, according to Merrill Lynch. The investment bank also notes that some $1.2 trillion in equity and housing wealth was wiped out in the first quarter alone because of plunging home values.

At the same time, revolving credit usage — which includes credit cards — accelerated sharply to a year-over-year growth rate of about 8 percent in recent months. That’s the fastest rate in seven years and well ahead of the 2 to 3 percent rate of growth from 2004 through 2006 when home equity lines of credit were a bigger source of cash for consumers, according to Merrill.”

Unfortunately, credit card companies are wary of desperate customers racking up bills during this economic downturn. Many are tightening their own standards and are limiting the credit they will give customers. When a customer with a credit balance has his limit reduced, his credit score almost always decreases. This can make it more difficult to apply for another card or take out a home equity line of credit.

While credit card companies have become more strict than in recent years, borrowers with good credit can still take out a line with relatively little hassle.

See Also:

How a HELOC Works

Tags | Heloc, heloc crisis, home equity line of credit, mortgage crisis