HELOC Recommendations to Consolidate Credit Card Debt

[Jose Mena Diaz]

Hey there, Bigger Pockets family! 

I'm currently a bit stressed because I'm facing higher credit card debt than I've ever had after remodeling our house and paying for our wedding (I know, I know, financing this is a rookie mistake). It's time for solutions. I've scolded myself about it plenty already. 

I'm in about $70k between different cards. My mortgage balance is just under $290k and the house is currently worth between $450-500k easily. Because of the current credit card utilization percentage, my FICO score dropped from above 800 to a 660. 

Would a HELOC be an advisable option to consolidate that credit card debt? If so, what are your lender recommendations?

Thanks in advance for your feedback! 

[Bradley Showalter]

Good Morning @Jose Mena Diaz!

I am sorry to hear about the situation that you are currently in! When it comes to the HELOC, I have worked with several people who are in a similar situation looking to utilize a HELOC to consolidate their debts as well. I would weigh out the HELOC option vs a Refinance option depending on what rates are for both and what the payments would look like as well. The main benefit that I would be looking at is by getting the debts paid off would ideally boost your credit score so later on when rates drop again you can refinance again at a lower rate!

If you have any other questions please let me know! I would be more than happy to help!

[Jose Mena Diaz]

Thank for the input, @Bradley Showalter! Thankfully I was able to secure a nice interest rate of 3.65 on my mortgage so I rather not refinance into a higher rate - they're about double what my current rate is at the moment.

The frustrating thing is that a lot of the flagship HELOC lenders require a FICO score of 680 and I'm about 20 points off at the moment.

[Jose Mena Diaz]

Sure thing! Please send me a PM. 

[Erik Estrada]

Quote from @Jose Mena Diaz:

Hey there, Bigger Pockets family! 

I'm currently a bit stressed because I'm facing higher credit card debt than I've ever had after remodeling our house and paying for our wedding (I know, I know, financing this is a rookie mistake). It's time for solutions. I've scolded myself about it plenty already. 

I'm in about $70k between different cards. My mortgage balance is just under $290k and the house is currently worth between $450-500k easily. Because of the current credit card utilization percentage, my FICO score dropped from above 800 to a 660. 

Would a HELOC be an advisable option to consolidate that credit card debt? If so, what are your lender recommendations?

Thanks in advance for your feedback! 

 Hey Jose, 

What is the APR on the cards? A HELOC or cash-out refinance could work to consolidate debt. Happy to connect

[Luis Maqueira]

Hi Jose I am and Multifamily investor but with  great knowledge of credit card debt. call me let's chat... just for advice I don't have any programs for credit card debt solutions.. just plain knowledge

[Kerry Baird]

@Jose Mena Diaz, we recently did a similar thing: bought a new house and spent money getting the house ready as a short term rental.  I have quite a few houses at this point...and yet my credit score will dip when we buy another house.

I am working on getting business credit but this year we bought a bigger house, and needed to use some of our personal credit.  It happens. 

I like the debt snowball to pay off credit cards...and as an aside I used the debt snowball to pay down houses. This is where a side hustle can help to pay off the credit.  Credit rates, like other interest rates, have been trending up, so we have to focus to pay the highest rate card, and then the next and then the next.  

[Dave Skow]

@Jose Mena Diaz- yes - HELOC better than CC debt - contact the plavce you bank for a HELOC ...the programs are relatively similar from lender to lender ...you should be able to get a 92K HELOC for free ...make sure you dont make the minimum interest only payment and make a payment as much as possible on the heloc

[Jose Mena Diaz]

Thank you all so much for your input and recommendations! I'm currently in the process of an application with a local bank. Let's see how it goes! 

[Caroline Gerardo]

If your consumer credit score is 660 your mortgage one may be lower.

The good rate HELOC lenders want a 721 middle. Will your "local bank" go that low? Ask them to put it in writing.

HELOC with 660 score rate start is probably in range of 5.5-8.5 start rate depending on loan to value and your income.

REMEMBER HELOC's maximum rates are 18- 20% same as your credit cards.

Is there any way to increase your income and pay off the cards?

I can suggest a couple HELOC lenders who will close with your score.

[Jose Mena Diaz]

Per a phone call I just had, they will. And the rate quoted over the phone is just over 5% for the first year and 1.5 over prime every year after. Which currently lands me at exactly that 5.5-8.5 range you're referring to. 

Increasing income and paying off the cards is definitely the goal but I'd like to consolidate them under one loan with a lower rate ASAP. 

[Mohammed Rahman]

Hey @Jose Mena Diaz - good people make mistakes too, it happens. 

What I'd keep in mind now is not to add more unnecessary debt onto your plate than you can handle. Going through the HELOC route probably sounds like the best thing considered, alternatively you could also potentially refinance - it depends on how much money you pull out and what you can handle monthly cost wise.

A smart move would be to reach out to the lender that has the note on your current home and speak to a loan officer there.