How Does a HELOC Affect Your Credit Score? 

When you’re thinking about opening a home equity line of credit (HELOC), it helps to know how it might affect your credit score at different points along the way. A HELOC can give you a lot of financial flexibility, but it can also lead to changes in your credit, some positive and others that may cause a temporary dip, depending on whether you’re applying, borrowing, repaying, or closing the account.

Because a HELOC touches major credit factors like inquiries, utilization, and payment history, I wanted to break down what happens at each stage. My goal is to make it easier to understand what to expect and how to manage a HELOC without putting your credit at risk.

Table of Contents

1. How a HELOC affects your credit score at each stage
   1. 1. Applying for a HELOC (credit inquiries)
   2. 2. Opening the account (length of credit history, credit mix)
   3. 3. Using the credit line (credit utilization)
   4. 4. Repaying a HELOC (payment history)
   5. 5. Closing the account (credit utilization, length of credit history, credit mix)
2. How to avoid credit score damage when using a HELOC
   1. Does an open HELOC hurt my credit if I don’t use it?
3. Is getting a HELOC worth the credit score impact?

How a HELOC affects your credit score at each stage

A home equity line of credit acts like revolving credit, similar to a credit card. Because of how a HELOC is structured, it affects two major scoring factors more than anything else: credit utilization and payment history. These areas carry significant weight in most scoring models.

A HELOC’s impact isn’t one-size-fits-all, and the effects can shift as you move through the borrowing process. Your credit score may rise or dip as you apply, open the line, draw funds, make payments, and eventually close the account.

These changes happen because credit models react to updates in your balances, account history, and payment patterns over time. The good news? Most HELOC-related score changes are temporary. If you manage the account responsibly, especially by keeping your utilization low and making on-time payments, your score will typically rebound.

Below is a breakdown of the HELOC process and how each stage can affect your score.

1. Applying for a HELOC

• Impact: Credit inquiries

When you apply for a HELOC, the lender performs a hard credit inquiry to review your credit profile. Hard inquiries often cause a small, temporary drop in your score. The impact typically fades within a few months.

Soft inquiries used for prequalification don’t affect your credit, and can be helpful if you’re not sure if you have the credit score needed to qualify for a HELOC. There are even lenders who offer HELOCs to borrowers with credit issues, so don’t let this prevent you from exploring your options.

Most scoring models also treat multiple inquiries made within a short rate-shopping window as a single inquiry. This helps you compare offers from lenders, banks, or credit unions without repeatedly hurting your score.

Even so, as you’re evaluating HELOC options, it’s helpful to start by evaluating lenders that will let you know what you might get without a credit check. For instance, Figure and LendingTree both allow you to see what you might get without it affecting your credit score. 

2. Opening the account

• Credit impact: Length of credit history and credit mix

When your HELOC is approved, it appears as a new account on your credit report. New accounts can lower the average age of your credit history, which can cause a small score dip at first. That effect usually softens as the account ages.

Because most HELOCs are treated as revolving credit, they also influence your credit mix. Adding a different type of account can help strengthen your profile over time, especially if you currently have mostly installment loans or limited credit history.

3. Using the credit line

• Credit impact: Credit utilization

Your HELOC increases the amount of revolving credit available to you. Once you start borrowing from the line, your credit utilization ratio rises. Credit scoring models weigh credit utilization heavily, so even moderate balances can influence your score.

A common guideline is to keep revolving credit usage to no more than 30% of your limit. For example, if you have a $40,000 line, staying below $12,000 can help protect your score. High utilization, especially near the limit, may lead to meaningful credit score declines.

4. Repaying a HELOC

• Credit impact: Payment history

Payment history is the most influential factor in your credit score. Making on-time payments as your HELOC balance changes helps build a stronger credit profile over time. Even one late payment can have lasting effects and may remain on your credit report for up to seven years.

Many HELOCs start with interest-only payments and later switch to full amortizing payments or a large lump sum payment at the end of the loan. Preparing for that shift is important because the higher payment or lump sum can surprise borrowers. 

5. Closing the account

• Credit impact: Credit utilization, length of credit history, and credit mix

Closing a HELOC reduces your total available revolving credit, which can increase your overall utilization. Even if the balance is paid off, losing that unused credit may cause a short-term score drop. 

Closing an older HELOC can also lower the average age of your accounts, which may slightly affect credit history length. This matters because the length of your credit history is part of what makes up your credit score.

Even so, many borrowers close a HELOC after completing a project or when the line is no longer needed. If you’re considering this step, it can help to contact your lender to learn how to cancel the account and what close-out requirements apply.

How to avoid credit score damage when using a HELOC

To keep your credit score steady throughout the HELOC process, a few smart habits can make a big difference:

• Apply carefully. Only submit full applications to lenders you’re serious about to limit hard inquiries. Getting prequalified with a soft inquiry can help you compare options without affecting your credit.
• Keep your HELOC balance low. Once the line is open, avoid using a large portion of your limit. This helps keep your utilization ratio steady and prevents unnecessary dips in your score.
• Make every payment on time. Payment history has the biggest influence on your credit score, so staying current is essential.
• Plan ahead for amortizing payments. If your HELOC has an interest-only period, prepare for the higher payment once principal repayment kicks in. Building a budget buffer can help prevent missed payments during the transition.
• Be strategic about closing the account. Closing a HELOC reduces your available credit. Think through the timing and weigh the benefits and risks before requesting closure.

Does an open HELOC hurt my credit if I don’t use it?

An unused HELOC generally doesn’t hurt your credit because the extra available credit may help keep your utilization low. The main impact comes from the initial inquiry and having a new account added to your credit report.

If you’re considering a HELOC for emergencies, you may want to review whether opening one just in case makes sense for your situation. It’s often easier to plan for emergencies before you need the funds rather than during a crisis.

Is getting a HELOC worth the credit score impact?

Despite the potential effects on your credit score, a HELOC can still be worth opening if your financial habits, credit profile, and long-term plans support responsible use. Most score changes are temporary, and with good management, a HELOC can even strengthen your credit over time.

It may be a good fit if you expect to use only a small portion of the line, have stable income, and feel prepared for the higher payments that come once the interest-only period ends.

A HELOC can also make sense if you already handle revolving accounts well and want flexible access to funds for planned expenses. When used thoughtfully, the benefits, like building on-time payment history and increasing your available credit, can outweigh short-term dips from inquiries or utilization shifts.

Before moving forward, consider how a HELOC aligns with your credit goals, existing debt, and ability to repay. This can help you decide whether opening one will support your overall financial picture.