Folks who are thinking about home equity loans may have reason to feel better about their choice to move forward with one.
With home prices continuing to soar, homeowners are now sitting on a record-high $22.7 trillion in equity, the highest amount since data was first recorded in 1945, according to a report from LendingTree. The publication conducted a survey that found that while folks haven't been tapping into home equity too much these days, doing so would not have a noticeable impact on their credit scores.
According to LendingTree, more than 1,500 home equity loan requests in 40 of the nation's largest metros surveyed, saw a relatively small impact on their credit scores. Additionally, these declines in borrowers' credit scores usually rebound in less than a year.
“Borrowers across all 40 of the metros analyzed in LendingTree’s study saw an average decline of 17.5 points in their credit score in the months following a home equity loan,” according to the survey findings. “At the high end, scores declined by about 26 points in Orlando, FL, and on the low end, they declined by just under 9 points in Kansas City, MO.”
In terms of how fast scores rebounded, the survey found that credit scores usually turned around in an average of 96 days from their lowest point to pre-loan levels. Folks in Austin, TX saw their credit scores rebound the fastest with a reported 70.5 days. Meanwhile, borrowers in Memphis, TN had the longest recovery time of 127.9 days, according to the report.
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