Credit.com explains:

“The majority of time a HELOC is reported to the credit bureaus it is also accompanied by descriptive text, called a narrative code, which explains the nature of the account. For example, it is common to see the text “Home Equity Line” or “Secured by Home Equity” on a credit report along with a HELOC account. This text is picked up by smart credit scoring models and causes it to exclude the HELOC when determining credit card debt-related measurements of your credit reports.”

In general, a HELOC has no affect or a positive affect on credit scores.

For more information see:

Will a HELOC Affect My Credit Score?

Will Paying Off My Credit Cards with a HELOC Improve My Credit Score?

USA Today explains:

“…Watts says, “It isn’t always possible for Fair Isaac to distinguish a HELOC (home-equity credit line) from other types of (revolving) credit. It’s one of those vagaries between lenders and credit bureaus that frustrates score developers.”

His advice? If your home-equity line is frozen, pay it off before applying for a mortgage. “As far as your score goes,” Watts says, “the best way to treat any account that’s being reported as having a very high utilization rate is to pay down the account.”

Check your report to see how you home equity line of credit is listed.

See Also: 

How the HELOC Freeze Can Damage Your Credit Score

HELOC Freeze Damaging Credit Scores

Here’s how:

If you have a lower limit (under $20,000 usually, but no one knows the exact figure), your HELOC is probably reported to the credit bureaus as a “revolving line of credit.” In this case, the bureaus treat your HELOC as though it were a credit card. If a lender reduces your credit limit, your total available credit will go down and your utilization will go up. f your utilization goes up too much, your score will suffer.

Consider this example: A borrower has a HELOC with a limit of $20,000 and other revolving credit (such as credit cards) with a limit of $30,000. If has $20,000 of debt, his utilization is at 40%. However, if he loses his HELOC line, his utilization skyrockets to over 66%. The high utilization may cause his credit score to lose points.

What to Do if Your Credit Score Suffers from the HELOC Freeze

If you notice a credit score drop after having your HELOC line reduced, don’t panic. Remember, the drop is due to ratios that can be improved. Paying back your debt will reduce your utilization and raise your score.

Another solution is to apply for additional credit, either through credit cards or by refinancing your HELOC with a different lender. While this option may help in the long run, it has risks. Your credit score will temporarily drop when you apply for and open a new line. Additionally, it can be tempting to use high-interest credit cards in place of a lower-interest HELOC.

If you don’t plan on using your credit score to make a large purchase (i.e. house, car, etc.) in the next six months, you may want to just hold out. Your regular monthly payments will chip away at your utilization and your score should make a steady recovery.

See Also:

Will a HELOC Affect My Credit Score

Will Paying of Credit Cards with a HELOC Improve My Credit Score?

Low Credit Limit HELOCs

If your lender gives you a low credit limit, FICO will view your HELOC as a revolving credit line similar to a credit card. In this case, utilization matters. If you have a credit card with a $5,000 limit and a HELOC with a $15,000 limit, expect your score to decrease when maxing out the HELOC line. You may notice a decrease in your credit score when using over 20% of your total available credit. You may experience a significant decrease should you use over 50%.

Fair Isaac, the creator of the FICO score, does not say what is considered a low credit limit. However, many mortgage brokers speculate that the majority HELOCs under $25,000 fall into this category.

High Limit HELOCs

If your lender gives you a high credit limit, FICO will view your HELOC as an installment loan. Your credit score may dip at the opening of the line, but should not be affected by your utilization. Your score may increase as you make regular payments. However, using 10% of the line will be the same as using 100% when it comes to utilization. Read more…