If your equity line isn't what it used to be, join the club. MoneyWatch's Eric Schurenberg details exactly what you should do to try and keep your credit line intact.
Host: If you're a homeowner with a Home Equity Line of Credit, or an HELC, don't be surprised if your ceiling caves in sometime soon. I'm talking about the ceiling on your credit line. Another casualty of the credit crunch and the real estate crash. In this environment many lenders are cutting the amount they'll let you borrow against your equity. Some borrowers have seen their caps cut by 80% or more. Not only could that put you in a financial bind, a falling HELK cap could also cut into your credit score because it lowers the amount of credit available to you. The main culprit is a computer model known as an automated evaluation model, or AVM. Lenders use them to quickly estimate your home's value. The trouble is AVMs compile housing data for a whole area. They don't always give the most accurate estimate for any single home, like say yours. Now if you get a HELC notice that you think is unfair you can appeal it. And you have a good chance of winning. Start by finding out all you can about your home's real value. The inexpensive route is to research the public records on recent home sales to prove that values of comparable homes are higher than the bank is giving you credit for. You can also get a consumer version of the AVM from a firm called Home Smart Reports for $20. The surer way, though, is to get a professional appraiser to testify to your home's true value. That may cost you $400, but if you need that HELC for planned renovation, for emergency money, it could be worth it. And it's one small way to fight back and win against the credit crunch.
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