Does a HELOC Affect Your Credit Score? The Full Picture

Will opening a HELOC hurt your credit? It's one of the most common questions homeowners ask.

The honest answer: it depends on how you use it.

A HELOC can temporarily ding your score — and strategically boost it over time. Let's break down exactly what happens at each stage.

Short-Term Impact: What Happens When You Apply

Opening a HELOC creates two immediate credit impacts:

Hard Inquiry: 5-10 Points (Temporary)

When you apply, the lender pulls your credit report. This "hard inquiry" typically drops your score by 5-10 points.

The good news:

• Impact fades after 12 months
• Inquiry disappears from reports after 24 months
• Multiple HELOC inquiries within 14-45 days count as one (rate shopping)

If you're comparing HELOC offers, do it within a short window to minimize inquiry impact.

New Account: Minor Impact (6 Months)

A new HELOC lowers your average account age — one factor in your credit score.

If you have:

• 10+ year credit history: Minimal impact
• 5-10 year history: Small impact
• Under 5 years: Moderate impact

This factor recovers as the account ages. Within 6 months, most people see their score stabilize or improve.

How Your HELOC Appears on Credit Reports

Here's where things get interesting. HELOCs are categorized differently by different credit bureaus and scoring models.

Some treat HELOCs as:

• Revolving credit (like credit cards) — utilization matters
• Installment loans (like mortgages) — utilization less important

The FICO 8 model (most commonly used) typically treats HELOCs as revolving credit when you're actively drawing, and more like installment debt during repayment.

Why this matters: If your HELOC is treated as revolving, your HELOC utilization ratio affects your score.

HELOC Utilization: The Number That Matters

Credit utilization measures how much of your available credit you're using. It's roughly 30% of your credit score.

HELOC utilization formula: Amount Drawn ÷ Credit Limit = Utilization

Example:

• HELOC limit: $100,000
• Amount drawn: $30,000
• Utilization: 30%

The Utilization Sweet Spot

The rule: Keep HELOC utilization under 30% when possible. Under 10% is ideal.

When a HELOC HELPS Your Credit Score

Here's the paradox most articles miss: A HELOC can actually improve your credit.

Scenario 1: Debt Consolidation

You have $40,000 in credit card debt at 90% utilization across multiple cards.

Before HELOC:

• Credit card utilization: 90% (crushing your score)
• Score: 640

After using HELOC to pay off cards:

• Credit card utilization: 0%
• HELOC utilization: 40%
• Score: 680-700+

Even though you added a new account and inquiry, eliminating the high credit card utilization more than compensates. Many people see 40-80 point improvements within 60 days.

Scenario 2: Payment History Building

Your HELOC payment history reports monthly. Consistent on-time payments build your credit over time.

12 months of perfect HELOC payments: Positive credit impact 24+ months of perfect payments: Significant positive history

Scenario 3: Credit Mix Improvement

Credit scoring models like seeing a mix of account types: credit cards, mortgages, auto loans, etc.

If you only have credit cards, adding a HELOC (secured, installment-like) diversifies your credit mix — a small but positive factor.

When a HELOC HURTS Your Credit Score

A HELOC becomes a credit score problem when:

You Max It Out

Drawing 80-100% of your HELOC limit signals financial stress to credit algorithms. Your score will drop.

You Miss Payments

Late payments on a HELOC hurt just like any other late payment. A 30-day late can drop your score 50-100 points and stays on your report for 7 years.

You Apply During Credit-Sensitive Times

If you're about to:

• Apply for a mortgage
• Finance a car
• Seek business credit

The 5-10 point inquiry drop plus new account impact could cost you a better rate. Time your HELOC application strategically.

Timeline: Credit Score Recovery After Opening

Here's what to expect:

Most homeowners see their credit score return to pre-application levels (or higher) within 6 months of responsible HELOC use.

Strategic Credit Management with Your HELOC

Maximize the positive, minimize the negative:

Keep Utilization Low

Don't draw more than you need. That available credit buffer helps your score.

Set Up Autopay

Never miss a payment. Even one 30-day late can undo months of positive history.

Don't Close Unused Credit Cards

If you paid off cards with your HELOC, keep them open. Their available credit helps your overall utilization.

Monitor Monthly

Check your credit report to see how your HELOC is being reported and categorized.

Plan Big Purchases First

If you need a car loan or mortgage soon, handle that before opening your HELOC.

The Truth About HELOC and Credit Scores

A HELOC isn't inherently good or bad for your credit. It's a tool.

Used well:

• Pay off high-interest debt
• Keep utilization under 30%
• Make on-time payments

Result: Credit score often improves within 90 days

Used poorly:

• Max out the line
• Miss payments
• Apply right before a mortgage

Result: Significant score damage

For most homeowners who use their HELOC responsibly, the short-term credit impact is minor and temporary. The long-term impact is often positive.

The Bottom Line

Yes, opening a HELOC affects your credit score. Expect a 5-10 point drop initially from the inquiry and new account.

But if you:

• Keep utilization reasonable
• Make payments on time
• Use it strategically (especially for debt consolidation)

Your score will likely recover — and potentially improve — within a few months.

Don't let credit score fear stop you from accessing a financial tool that could save you thousands in interest.

---

Ready to Use Your Home Equity Wisely?

HonestCasa's digital HELOC helps you access your equity with competitive rates and minimal hassle. Your credit score can handle it — especially if you're using it to eliminate high-interest debt.

[Check Your Rate (Soft Pull First) →]

---

FAQs

Does applying for a HELOC hurt your credit?

Slightly. The hard inquiry typically drops your score 5-10 points. This impact fades within 12 months and disappears after 24 months.

Is HELOC utilization like credit card utilization?

Usually yes. Most scoring models treat HELOCs as revolving credit during the draw period, so keeping utilization under 30% helps your score.

How long does HELOC stay on credit report?

A HELOC stays on your credit report for as long as it's open, plus 10 years after you close it. Payment history on closed accounts remains for 7 years (late payments) to 10 years (positive history).

Can HELOC help improve credit score?

Absolutely. Using a HELOC to pay off high-utilization credit cards often boosts your score 40-80+ points within 60 days, despite the initial inquiry impact.