Can You Get a HELOC With Bad Credit?

Yes, you can get a home equity line of credit (HELOC*) even if your credit score isn’t as high as you would like it. To do so, you will have to meet your lender’s qualifications.

Before we go into a HELOC with lower credit, let’s take a look at credit score ranges and see what range is considered a poor or bad credit according to FICO, which is rated on a scale from 300 to 850.

• Poor credit: 300 – 579

• Fair credit: 580 – 669

• Good credit: 670 – 739

• Very good credit: 740 – 799

• Excellent credit: 800 – 850

To find out whether your credit score qualifies you for a HELOC, connect with a professional Loan Officer who can answer any of your questions when you begin your application.

Lenders typically look for borrowers to have a minimum credit score of 620 to qualify for a HELOC.

Borrowers with credit scores lower than 620 will have a harder time qualifying for a HELOC, as lenders can see them as a higher risk.

Some other qualifications lenders will ask a borrower to meet for a HELOC are:

• 15% - 20% home equity
• Proof of consistent income
• Debt-to-income (DTI) ratio of 50% or less

While it may be tougher, you can still get a HELOC if your credit is lower than you would like. Some lenders will approve a HELOC if the borrower’s credit is considered fair.

A fair credit score, according to FICO, lands in the range of 580 – 669. Lenders look for borrowers’ credit to be no lower than 620.

If your HELOC application is denied, the first thing you will want to do is to talk with your Loan Officer to find out why.

If you aren’t in a rush, your best choice will be to take the time to work on the reason that your application was denied. This could mean building up your credit score**, working on lowering your DTI or increasing your home equity.

You can build up your credit score and lower your DTI by paying down any debts you have and making sure you are on top of any future payments you have. Paying down the principal on your home loan is the easiest way to increase your home equity. Making home improvements and renovations could also help boost your home equity.

If your HELOC application was denied and you don’t have time to wait, there are alternatives you could consider.

If you are not able to meet any of the qualifications for a HELOC, these are a few alternatives that you could consider:

• Cash-out refinance: A cash-out refinance allows you to replace your current mortgage with a larger one that has new terms, giving you the difference between the two in cash.
• Home equity loan: Similar to a HELOC, home equity loans allow borrowers to tap into their home equity in a lump-sum instead of the revolving credit that HELOCs offer.
• Personal loan: Borrowers can get a lump-sum amount without always requiring them to put up any collateral with a personal loan. Because they aren’t always backed through collateral, they could come with higher interest rates.
• Credit card: If you are looking for a line of credit like a HELOC offers, you can consider getting a credit card. Paying off your credit card can also help build your credit score.

For those looking to apply for a HELOC with bad credit can follow these steps before applying.

Each lender’s requirements can vary. Check the requirements of your lender for an idea of what you will need to qualify for a HELOC.

During this stage, you can also take advantage of an online HELOC calculator to see how much of your home equity you could use.

Gathering documents needed for your application can save time when you are ready to start. Some of the documents and information you will need are proof of income from the past two years, savings and investment account information, and your recent mortgage statements to help determine your home equity. Some lenders will also ask for a recent appraisal to determine your property’s current value.

After you have checked your lender’s requirements and gathered documents, you will be ready to begin your application.

Beginning your application online will connect you with a professional Loan Officer who can walk you through the process and answer any questions you may have.

Start your application online today and see if you qualify for a HELOC with your current credit score.

_{*Rate’s HELOC is a fixed-rate open-end product using your home as collateral. Not available in all states. Go to Rate.com/HELOC for information including important property and borrower requirements and restrictions which impact rate and max available loan amount. Subject to approval.}

_{**If Applicant self-reports credit score as “needs improvement,” <COMPANY NAME> will not run credit or provide credit scores via the Digital Mortgage. Applicant may request credit scores by contacting Rate.}

_{Applicant subject to credit and underwriting approval. Restrictions apply.}

_{Information provided is for educational purposes only. It should not be construed as financial or legal advice or instruction. Rate does not guarantee or assume liability for the accuracy, completeness or timelines of the information. You should conduct additional research before making any mortgage related decisions.}