How do you get a home equity loan with poor credit?

Getting a home equity loan with poor credit (typically a score below 620) is difficult but not impossible. The path forward involves building equity first, reducing your debt-to-income ratio, correcting credit report errors, and shopping lenders who specialize in non-prime home equity products — while understanding that lower scores always result in higher rates.

A home equity loan lets you borrow against the equity you've built in your home as a lump-sum second mortgage, as the CFPB explains. Because your home is collateral, lenders take on real risk if you default — and a poor credit history signals elevated default risk. That doesn't shut the door entirely, but it does narrow the lender pool and raise the cost of borrowing. Understanding the thresholds helps you decide whether to find my match or wait until your credit improves.

What 'poor credit' means to a home equity lender

Most mainstream lenders (banks, credit unions, and online lenders) require a minimum FICO score of 620 for a home equity loan. Scores below 620 are generally considered "poor" by conventional standards and will disqualify applicants at most institutions. Some credit unions or community banks with portfolio lending programs may work with scores as low as 580, but they are the exception — not the rule. Even if approved at a low score, the CFPB notes that borrowers with poor credit typically face significantly higher interest rates and stricter terms.

The three qualification pillars — and how poor credit affects each

Credit score: The entry threshold. Lenders typically require 620+; best rates go to 700+. A low score may mean denial — or a rate premium of 2–4 percentage points above the prime borrower rate.
Equity (Combined LTV): Your equity may partially offset a low score. Most lenders cap combined LTV at 80%–85%. More equity — say, staying at 70% CLTV instead of 85% — reduces lender risk and may improve your chances of approval.
Debt-to-income ratio (DTI): All monthly debt payments divided by gross income. Most home equity lenders require a back-end DTI at or below 43%, consistent with qualified mortgage standards. A lower DTI can compensate somewhat for a weaker score.

Steps to take before applying

Get your free credit reports. Under federal law, you can access your reports from all three bureaus at AnnualCreditReport.com. Review each report for errors — disputed errors that are corrected can raise your score without taking any other action.
Pay down revolving balances. Credit utilization (balances ÷ credit limits) is the second-largest factor in your FICO score. Reducing utilization below 30% — ideally below 10% — can add meaningful points relatively quickly.
Avoid new credit applications. Each hard inquiry temporarily dips your score. Don't open new accounts or apply for other credit in the months leading up to your home equity application.
Calculate your CLTV before approaching lenders. Divide your first mortgage balance plus the desired loan amount by your home's current estimated value. If your CLTV would exceed 85%, you may not have enough equity to borrow regardless of your score.
Shop credit unions first. Credit unions often have more flexible underwriting criteria than banks for members with blemished credit, and their rates on home equity products are frequently lower than non-bank lenders. Membership eligibility varies.

Alternatives if you don't qualify

If your score is below 620 and lenders decline your application, consider waiting 6–12 months to raise your score before reapplying. Alternatively, a cash-out refinance replaces your entire first mortgage and may be available through FHA programs (which allow scores as low as 580 with 3.5% equity remaining) — though it restarts your mortgage clock. A personal loan carries no home-as-collateral risk but typically has higher rates and shorter repayment terms. Each option has different cost and risk tradeoffs; consult the CFPB's home equity resources before deciding.

Your home is on the line

A home equity loan uses your home as collateral. If you miss payments, the lender can foreclose — even if your first mortgage is current. Borrow against your home's equity only when you have stable income and a clear repayment plan. A high interest rate from a poor-credit lender compounds that risk.

Sources

A home equity loan allows homeowners to borrow against the equity in their home as a lump-sum second mortgage at a fixed interest rate. — CFPB — What Is a Home Equity Loan?
Borrowers with poor credit who obtain a home equity loan or HELOC typically face significantly higher interest rates and stricter loan terms than borrowers with good credit. — CFPB — Home Equity Loans for Borrowers With Poor Credit
Loan-to-value ratio is a key factor lenders use to assess mortgage risk; a lower LTV generally means lower costs for the borrower. — CFPB — What Is a Loan-to-Value Ratio?
The Federal Reserve H.15 Selected Interest Rates release tracks the Prime Rate, which serves as a benchmark for variable-rate home equity products. — Federal Reserve — H.15 Selected Interest Rates

Key takeaways

Most home equity lenders require a 620+ credit score; below 580 disqualifies applicants at nearly all mainstream lenders.
A lower combined LTV (more equity) and lower DTI can partially compensate for a weaker score.
Fix credit report errors first — they're free to dispute and can raise your score without other changes.
Credit unions often have more flexible criteria than banks for home equity products.
If you don't qualify now, a 6–12 month credit-improvement plan may open better options than applying at high-rate non-prime lenders.

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