Question: I am refinancing my house and the broker said I could get a home equity line of credit. Does this hurt me if I never use it or if I use it for an emergency?
Answer: Having too much credit can impact your credit score, but it all depends on your circumstances. How much credit you have is just one of many factors that impact you credit such as how much debt you have, your payment history and your employment history.
When you apply for credit, your ability to pay is one of the primary factors a lender will use in making a decision on whether to extend you credit. In terms of the worst case scenario, creditors will consider what might happen if you maxed out all of your available credit. I have seen creditors turn people with nearly perfect credit histories and no debt simply because they had far to much available credit.
If you have sufficiently available credit to get yourself in trouble, it might have an impact on your ability to get new credit for things like a new car or a new credit card. Before applying for credit, you speak with the lender about their underwriting standards to see if your line of credit might impact your ability to get a new loan.
About the Author: Carl H. Starrett II has been a licensed attorney since 1993 and is a member in good standing with the California State Bar and the San Diego County Bar Association. Mr. Starrett practices in the areas of bankruptcy, business litigation, construction, corporate planning and debt collection.
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