Okay, so I was reviewing project files last Tuesday morning when I noticed something that's become increasingly common since mid-2024: more homeowners with less-than-perfect credit trying to tap into their equity. And I completely understand the frustration.
You've been making your mortgage payments, you've built up substantial equity in your home, and now you need to access those funds for renovations or debt consolidation. But then you check your credit score and it's, well, not ideal. Maybe it's 640, maybe 680. You're wondering if that's even enough to qualify for a home equity loan.
Here's the good news: Yes, it's absolutely possible to get a home equity loan with bad credit. I've watched countless homeowners successfully navigate this process through our project work, and I'm going to walk you through exactly how to do it in 2025.
Let me simplify this for you. A home equity loan lets you borrow against the value you've built in your home. Think of it like this - your home is worth $400,000, you owe $250,000 on your mortgage, so you have $150,000 in equity. That equity represents real value you can potentially borrow against, even if your credit score isn't perfect.
The mortgage lending landscape has shifted quite a bit over the past year. According to CBS News, home equity loan rates currently average around 8.2% for 10-year terms and 8.15% for 15-year terms as of November 2025, down from earlier in the year thanks to Federal Reserve rate cuts. For comparison, personal loans average around 12% and credit cards hover near 21%, making home equity loans significantly more affordable if you can qualify.
But qualification is where things get tricky when your credit score is below 700. I've learned through my MSW program that financial stress creates a cyclical pattern: bad credit makes it harder to get affordable loans, which can lead to more expensive borrowing options, which can further damage credit. Let's break that cycle today.
In this comprehensive guide, I'll show you the exact credit score requirements different lenders use in 2025, walk you through six proven strategies to improve your approval chances, and give you realistic alternatives if a traditional home equity loan isn't quite within reach yet. By the end, you'll have a clear roadmap for accessing your home equity, regardless of where your credit score stands right now.
Before we dive into qualification strategies, let's make sure we're on the same page about what we're working with here.
Credit scores range from 300 to 850, and different lenders categorize them differently.
Here's how the system typically breaks down:
Poor credit falls between 300-579, where you'll struggle to qualify for most traditional loans. Fair credit runs from 580-669, which is where many lenders start considering applications but with higher rates. Good credit begins at 670-739, where you'll see better terms and approval odds. Very good credit spans 740-799, and excellent credit sits at 800-850.
According to Yahoo Finance, the average FICO score in the United States is currently 714, landing in the good credit range. For home equity loans specifically, most lenders draw the line at 620-640. That's your baseline entry point.
But here's something important: when lenders say "bad credit" in the context of home equity loans, they're usually talking about scores below 680. Why? Because home equity loans are second mortgages. The lender takes on more risk since they'd be second in line to get paid if foreclosure occurred.
I was just in class learning about risk assessment in lending, and this concept came up. From a lender's perspective, second mortgages carry inherently more risk than primary mortgages. If your home goes into foreclosure and gets sold at auction, the first mortgage lender gets paid first. The home equity lender only gets what's left over, if anything.
This elevated risk means lenders compensate by requiring either higher credit scores or charging higher interest rates. Sometimes both. It's not personal, it's mathematical risk calculation.
According to Bankrate, many lenders now accept credit scores as low as 620 for HELOCs, with home equity loans typically requiring 680 or higher. Requirements vary by lender, with some financial institutions accepting scores as low as 640-650 for home equity products.
The home equity lending landscape has improved considerably since early 2024. Federal Reserve data from St. Louis FRED shows that HELOC balances rose to $422 billion in Q3 2025, up $105 billion from the low point reached in Q1 2022. This indicates increased lending activity and potentially more flexible qualification standards.
Home equity loan rates have been declining throughout 2025 thanks to Federal Reserve rate cuts implemented in September and October. According to CBS News, a $25,000 home equity loan now costs between $241-$306 monthly depending on term length, down from $246-$311 earlier in the year. While these reductions seem modest, they add up to $600-$900 in savings over the life of the loan.
At AmeriSave, we've seen this trend reflected in application patterns. More homeowners are exploring home equity options now than in early 2024, when rates peaked above 9%. The improved rate environment creates better opportunities for borrowers with credit challenges.
Let me paint a realistic picture for you. According to the Federal Reserve Bank of St. Louis, the average sales price of homes sold in the United States reached $510,300 in Q4 2024. With home values having increased substantially since 2020, when total homeowner equity stood around $20 trillion, many homeowners are sitting on significantly more equity than they realize.
That equity represents real borrowing power. Even if your credit score hovers in the 620-680 range, substantial equity can offset credit concerns in lenders' risk calculations. A homeowner with $200,000 in equity and a 650 credit score may present less risk than someone with $30,000 equity and a 720 score, depending on other factors.
Can you really get a home equity loan if you have bad credit?
The short answer is yes. Longer answer: It depends on how you define "bad credit" and what your whole financial situation looks like.
Most lenders for home equity loans and HELOCs want a credit score of at least 620, according to NerdWallet. Experian says, though, that borrowers are most likely to get approved if their scores are 700 or higher. The space between these two thresholds is where strategy is most important. Here's how the requirements for lenders are broken down in 2025: Most big banks won't lend you money for a home equity line of credit (HELOC) if your credit score is lower than 620. For a traditional home equity loan, the lowest score they will accept is 680. If you have a high equity percentage or income, some lenders will even consider 640 or 620 for a home equity loan.
Premium lenders or borrowers who want the best rates usually need a score of 740 or higher. We at AmeriSave look at everything. With our home equity loan, you need a median FICO score of at least 680, and the requirements get stricter as the loan-to-value ratio goes up. People who have scores between 680 and 699 can get up to 80% LTV. People with scores between 700 and 739 can get 85% LTV. People with a credit score of 740 or higher may be able to get a loan with a 90% LTV.
Here's the truth: even if you qualify, lower credit scores mean higher costs. This happens when interest rates go up and possibly when closing costs or origination fees go up as well. Some lenders may also want you to make a bigger down payment or have a lower LTV ratio, which will lower the amount of money you can borrow. The Mortgage Reports says that people with credit scores in the low to mid-600s usually pay 0.5% to 1.5% more in interest than people with good credit. That percentage difference means that you will pay thousands of dollars more in interest on a $50,000 home equity loan over 15 years. For example, let me show you. In November 2025, a borrower with a 760 credit score might be able to get an 8.0% rate on a 15-year home equity loan. If someone had a 650 score, that same loan might have a 9.5% rate. The difference in monthly payments on a $50,000 loan would be about $55, which adds up to $660 a year or almost $10,000 over the life of the loan.
I know you need money right now. Trust me, I get it. But sometimes it pays to wait three to six months to improve your credit score instead of rushing into a loan with bad terms. LendingTree says that credit scores can go up in 30 to 45 days after you start doing things that are good for your credit, depending on how often your lenders report to credit bureaus. Most lenders make changes every month. People who raise their scores by at least 100 points in a year usually pay off an average of $20,000 in debt during that time. If you only need to make small changes of 20 to 50 points, which can change the requirements for lenders, you might only need to focus on paying your bills on time for two to three months in a row and keeping your credit card balances below 30% of their limit. This is the human side of things: Our team worked on a project where we looked at how borrowers did. One applicant with a score of 645 really wanted to get equity to fix up their home. Instead of rushing into a loan with a 9.8% interest rate, we suggested that you spend 90 days aggressively paying off credit card debt and fixing two reporting mistakes. The score went up to 695. The better rate saved more than $8,000 over the life of the loan. It was well worth the three-month wait.
Six Ways to Get a Home Equity Loan Even if You Have Bad Credit
Let's get down to business. These aren't just ideas; they're the real strategies I've seen work for real borrowers over the years.
You can't get better at something if you don't keep track of it. Before you do anything else, get a full picture of your credit from all three major bureaus: Equifax, Experian, and TransUnion. Under federal law, AnnualCreditReport.com is the only place you can get free credit reports from all three bureaus. BHG Financial says that you can now check your credit report at each of the three national credit reporting agencies once a week. A lot of banks and credit cards also let you check your credit score for free. When you get your reports, take a close look at each one. Experian says that about 20% of people have mistakes on at least one of their credit reports. Some examples of these mistakes are names that are spelled wrong, wrong information about accounts you've paid off, wrong personal information like old addresses, or account reporting mistakes like late payment dates that aren't right. Here's something that most people don't know: your score can be 20 to 30 points different between the three bureaus because not all creditors report to all three. Most lenders use your middle score when they lend you money for a home. If your Equifax score is 658, your Experian score is 672, and your TransUnion score is 645, they will use 658 to see if you qualify.
It's not enough to just find mistakes; you also need to know how to dispute them. The Consumer Financial Protection Bureau has free templates for dispute letters that show you how to write them. The first step is to gather proof of the mistake. If your credit card account says you missed a payment in April 2023 but your bank records show that you paid on time, that's proof. If you see the same account on your report twice, get proof that it's the same account. MyFICO says that you should carefully check your credit report from all three agencies for mistakes. If you find any, you should dispute them by contacting both the credit reporting agency and your lender. Usually, the credit bureau has 30 days to look into your dispute. I learned from my MSW studies that being persistent is important here. Don't give up if your first disagreement is turned down. Get more paperwork and try again. Sometimes the credit bureau's first investigation doesn't find what you know is true, especially if the creditor's records aren't complete.
For some lenders, your debt-to-income ratio may be more important than your credit score. DTI shows how much of your monthly income before taxes goes toward paying off debt. To figure it out, add up all of your monthly debt payments, such as your mortgage, car loans, student loans, minimum credit card payments, and any other installment debt. Then, divide that number by your gross monthly income before taxes. Let's go through an example together. Let's say you make $6,500 a month before taxes. Your mortgage payment is $1,800, your car payment is $450, your student loans are $280, and the least you can pay on your credit cards is $320. You owe $2,850 a month in total. If you divide $2,850 by $6,500, you get 0.438, which is 43.8% DTI. NerdWallet says that lenders usually want your DTI to be 43% to 50% or less. Some lenders will let you go as high as 50%, but most will only go as high as 43%. We only require a DTI of 50% or less for home equity loans at AmeriSave, which gives you a little more freedom than some other places. When you take out a home equity loan, the payment counts toward your DTI. You won't be able to get the loan if the payment would put you over 50%, no matter what your credit score is. This is why paying off your debts before applying can greatly increase your chances of getting approved. Instead of making extra payments on all of your accounts evenly, try to pay off small balances completely. This is a surprisingly effective strategy. Paying off a $180 car payment gives you more borrowing power than lowering five different payments by $36 each, even though the total amount of debt you owe is the same.
The difference between what your home is worth now and what you still owe on your mortgage is your home equity. Let's use a real-life example to do the math. Your house is worth $450,000. Your main mortgage is for $280,000. You have $170,000 in equity ($450,000 minus $280,000). That's about 38% of the value. But here's the most important thing: lenders won't let you borrow all of your equity. The Mortgage Reports say that most home equity lenders will let you borrow up to 80–85% of your home's value when you combine your primary mortgage and home equity loan. Some will go as high as 90%, but that usually means you have great credit. In our example with 80% LTV limits, 80% of $450,000 is $360,000. You owe $280,000. That means you could borrow as much as $80,000 ($360,000 minus $280,000). AmeriSave's maximum LTV is 80% for borrowers with credit scores between 680 and 699. So, if you have $170,000 in equity but not much credit, you might only be able to get $80,000 instead of the full $170,000. You can still borrow a lot of money, but you need to know what the real limits are before you apply. Lenders want you to keep at least 10% to 20% equity as a safety net, which is what the industry says is standard. This is good for both you and the lender if home values go down. If the market changes, getting too close to 100% LTV could mean that you owe more than your home is worth.
When your credit score is close to the line, having solid proof of your income and assets can help you get approved. If you can show that your finances are stable and you are responsible with money, lenders will be more likely to work with you, even if you have had credit problems in the past. Before you apply, get together a few different types of documents. If you work for someone else, get your two most recent pay stubs. If you're self-employed or have a lot of other sources of income, get your W-2 forms from the last two years and your full tax returns. The Mortgage Reports say that self-employed borrowers usually have to show two years' worth of tax returns and a year-to-date profit and loss statement. To prove your assets, gather two to three months' worth of bank statements that show your checking and savings accounts, retirement account statements if you're using those funds for a down payment or reserves, and investment account statements. The more liquid assets you can show, the less likely you are to be seen as a risky borrower. Don't forget to check that you have a job. A written statement from your boss on company letterhead confirming your job title, salary, and length of employment is very important. If you've been working for the same company for five or ten years, that stability makes up for some credit problems. From going through so many project files, I've learned that the quality of the paperwork is often what makes the difference between getting approved and getting denied, not just the numbers. A well-organized file shows underwriters that you're responsible and serious, which can affect their decision if your credit score is in the middle.
Most people don't realize how important it is to time your application. If you applied for two credit cards last month, wait. Each hard inquiry on your credit report can lower your score by 3 to 5 points for a short time. If you ask for a lot of loans in a short amount of time, lenders may think you're overextending yourself. Experian says that credit scores treat multiple requests for the same type of loan made within a short period of time as one request so that people can shop around for the best rate. This means that if you want to get a home equity loan, checking rates with five different lenders in a 14- to 30-day period will only count as one inquiry impact. The strategic approach is to spend 2 to 3 months improving your credit profile by paying off debts and making sure all of your payments are on time. Then, when you apply, shop with more than one lender over the course of two weeks. This will have the least effect on your credit score and give you the best chance of finding good terms. Co-signers give you another way to move forward. A co-signer with good credit and a steady job basically lends you their creditworthiness. The lender looks at both applicants' credit scores and uses the lowest one to decide if they qualify. They also look at both incomes when figuring out DTI. This plan works best when the co-signer has a lot of money and not much debt. If you add a co-signer whose income is included, your DTI ratio may go down, which could mean you can get a bigger loan if they don't have much debt themselves. Important note: co-signing is a big deal. It hurts their credit too if you don't make payments. If you don't pay back the loan, they are legally responsible for doing so. You should only ask someone to co-sign if you are sure you can pay them back and they fully understand what they are agreeing to.
Based on what I'm seeing in the industry, let me explain what each credit score range means for your chances of borrowing against your home equity in 2025.
If your score is in this range, you won't be able to get a traditional home equity loan right now. But that doesn't mean you have no choices or that you can't get out of it. First, learn the basics of credit repair. Rolling Out says that becoming an authorized user on established accounts with a perfect payment history and low utilization can raise your score by 20 to 50 points in 30 to 60 days. Make sure that all of your current bills are paid on time, without fail. If you find any negative information that is not true, you can dispute it with the credit bureaus. You need to show consistent good financial behavior for 6 to 12 months before you can get a home equity loan, which is when you reach the 620 mark. I know it feels like forever when you need money right now, but personal loans from credit unions or community development financial institutions could help you get through this time while you work on improving your credit.
Things are about to get interesting here. Some lenders will let you qualify, but that doesn't mean you'll get approved or that the rates will be good. Bankrate says that a lot of lenders now accept scores as low as 620, even though 680 used to be the standard. You're in the sweet spot where lenders will look at your application, but they'll look at every other part of your financial profile very closely. Your strategy for getting people to agree needs to be strong in many areas at once. Keep your use of revolving credit below 30%, and even better, below 10%. Your DTI should be well below the 43–50% limit; if you can, try to get it down to 36% or lower. You should show at least 20% equity in your home, but 30% is better. Having a stable job for at least two years becomes very important. Any recent late payments or collections will be very bad signs. If your score is between 620 and 669, you can expect interest rates to be about 1 to 1.5 percentage points higher than the rates that are advertised for people with good credit. That means $40 to $60 more in monthly payments on a $50,000 loan.
You're now in a place where getting approval is more likely than possible. According to myFICO, a credit score of 670 or higher is usually considered good. If your DTI, equity, and income are all good, most mainstream lenders will give you the loan. Instead of "will I get approved?" your goal changes to "how can I get the best terms?" If you can, try to keep your credit utilization below 10% on all of your revolving accounts. This could raise your score by 10 to 20 points, which could put you in the next rate tier. Instead of closing older accounts after paying them off, keep them active to keep your current account age. AmeriSave will lend you up to 80% of the value of your home if your credit score is between 680 and 699. People with scores between 700 and 739 can get 85% LTV. It may not seem like much of a difference, but on a $400,000 home, that 5% LTV difference means you can borrow an extra $20,000. These kinds of interest rates are usually 0.25% to 0.75% higher than the best rates that are advertised. You're not paying a big extra fee for bad credit anymore, but there's still room for improvement.
This is the best place to be. The Mortgage Reports say that borrowers with scores over 740 get the best interest rates and terms. If you have the right income and asset documentation, you can get up to 90% LTV at AmeriSave if your score is 740 or higher. At this point, your attention turns to keeping what you've built. If you can, keep usage below 5% before statement dates. Use free services to keep an eye on your credit reports and fix any problems right away. Plan your mortgage or auto loan applications so that you don't have to deal with multiple hard inquiries when you need your score to be at its best. At this level, the rate advantage is very big. CBS News says that right now, prime borrowers can get home equity loans at rates of about 8.0–8.2%, while people with fair credit pay 9.5–10%. That 1.3% difference means about $90 in monthly savings, or $16,200 over the life of the loan, on a $75,000 loan over 15 years.
There are times when a traditional home equity loan isn't the best option, but you still need money. These are some realistic options to think about.
Home equity loans and HELOCs work in different ways, and those differences could help you if you have bad credit. Most lenders will only approve a HELOC if the borrower's credit score is at least 620. Some lenders will accept scores as low as 640, while traditional home equity loans require scores between 680 and 700. The main difference is that HELOCs work like credit cards and let you borrow money over and over again, while home equity loans give you a set amount of money at once. When you get a HELOC, you get a credit limit that is the most you can borrow. You can only borrow what you need during a draw period that usually lasts 5 to 10 years. Bankrate says that during the draw period, you may only have to pay interest. During the 10–20 year repayment period, you will have to pay both principal and interest. As of November 2025, CBS News says that current HELOC rates are about 7.82%, which is lower than the rates for traditional home equity loans. Most HELOCs, on the other hand, have variable rates that are linked to the prime rate. This means that your payment can change from month to month as market rates change. If you need payments that are always the same, this changeability can be stressful. We don't offer HELOCs at AmeriSave right now, but a lot of borrowers find them at credit unions and community banks that have looser qualification requirements. If you have bad credit and are thinking about getting a HELOC, the most important thing is to find a lender that offers fixed-rate HELOCs or rate caps that keep your rate from going up too much.
With cash-out refinancing, you get a new, bigger mortgage that pays off your old one and gives you the difference in cash. You can still use this option even if your credit isn't great because it's a first mortgage instead of a second lien. This is how it works in real life: Your home is worth $500,000, and you owe $300,000 on your current mortgage. You get $375,000 to refinance, pay off the $300,000 mortgage you already have, and get $75,000 in cash (minus closing costs). The good thing is that first mortgages usually have better rates than second mortgages, even for people with bad credit. The Mortgage Reports say that you might be able to refinance even if your credit score is low, but you'll have to meet the lender's requirements for LTV ratios and DTI. The bad thing is that you're getting rid of your old mortgage completely. If you have a 3.5% rate from 2021 and current refinance rates are 7%, you're giving up a great rate on your whole loan amount just to get equity. That might not make sense from a financial point of view unless your current rate is already close to market rates. Cash-out refinancing is best for people who want to get equity and also want to refinance for other reasons, like getting rid of PMI, getting rid of an FHA mortgage insurance premium, or switching from an adjustable-rate mortgage to a fixed-rate mortgage.
You don't have to put up your home as collateral for a personal loan, so you don't have to worry about losing your home or risking foreclosure. In addition, they usually need less paperwork and close more quickly than home equity products. CBS News says that the average interest rate on personal loans is now around 12%, which is much higher than the 8.2% average for home equity loans. For people with credit scores between 620 and 669, personal loan rates could be as high as 15% to 18% or more. Even though the interest rate is higher, personal loans can be a good way to bridge the gap. Get a personal loan for a smaller amount to take care of your immediate needs, and then work on improving your credit profile for 3 to 6 months so you can qualify for home equity. You might be better off paying the higher interest over those months than rushing into a home equity loan with bad terms. Most lenders only give personal loans of $25,000 to $35,000, and the most they will give is $50,000. This is fine for small home improvement projects or paying off debt, but it won't work for big renovations or big financial needs.
I talked about co-signers before, but this is worth going into more detail about because it's one of the best ways to deal with borderline credit situations. A co-signer basically adds their income and credit score to your application. The lender looks at both applicants' financial information, uses the lower credit score to decide if they qualify, and adds both incomes together to figure out DTI. Your DTI is 51% if you have a 640 score, make $5,500 a month, and have $2,800 in debt. This is higher than the 50% limit for most lenders. If you add a co-signer who makes $4,000 a month and has $800 in existing debt, the combined DTI drops to 38% on a total income of $9,500. Both applicants need to have pretty good credit because the lowest median score is what counts for qualification. If you have a score of 640 and your co-signer has a score of 750, the lender looks at the application at 640. But that 750 score can help you get a loan from lenders who might turn down a 640 application on its own. Your co-signer must be someone who trusts you completely, like a parent, adult child, or very close family member. They're signing legal papers that make them both responsible for the debt. It hurts their credit if you don't pay on time. If you don't pay at all, they owe the full amount. I learned in my MSW classes on family systems that money problems are one of the biggest causes of family fights. You should only co-sign if you and the other person are very clear about what you expect from each other, what your responsibilities are, and what to do if your finances change.
Let's go over what really happens after you get approved. Knowing how the process works will help you make better choices.
A home equity loan gives you a lump sum payment within 2 to 7 days of closing. You get the full approved amount right away, and then you pay it back in fixed monthly payments over the life of the loan. The Mortgage Reports say that the terms for home equity loans usually last between 5 and 30 years, with 10- and 15-year terms being the most common. We have terms of 10 years and 20 years at AmeriSave. Longer terms mean lower monthly payments, but you'll pay a lot more interest over the life of the loan. Let's use a home equity loan of $50,000 with an interest rate of 8.2%. Your monthly payment would be about $610 for a 10-year loan, and the total interest you would pay would be about $23,200. If you take out a loan for 15 years at 8.15%, your monthly payment goes down to about $481, but the total interest you pay goes up to about $36,580. That $129 a month in savings will cost you $13,380 more in interest over the life of the loan. The way payments are made stays the same for the whole term. With HELOCs that have variable rates, you won't know how much you owe each month until the end. This predictability makes it easier to plan your budget and your finances for the long term.
Home equity loans have closing costs that are similar to those of your original mortgage, but they are usually lower in terms of actual dollars. Bankrate says that closing costs usually range from 2% to 5% of the loan amount. Expect to pay between $1,000 and $2,500 in closing costs on a $50,000 home equity loan. Fees for appraisals ($300–$600), title searches and insurance ($700–$1,000), origination or processing fees (0.5–1% of the loan amount), recording fees ($50–$250), and credit reports ($25–$50) are all common. Some lenders offer home equity loans with "no closing costs." This usually means that they either add the closing costs to your loan balance or charge you a little more interest to cover those costs. You are still paying them, but in a different way. To find out the real cost, read the fine print carefully. At AmeriSave, closing costs depend on the loan amount, location, and other factors specific to the property. However, we make all fees clear before you apply.
Most lenders will let you lock in your rate once you get approved for a home equity loan, prior to underwriting approval. This locks in your interest rate for a set amount of time, usually 30 to 60 days, no matter what happens in the market. CBS News says that home equity rates have been going down all year because the Federal Reserve has been lowering rates. The rate cut in October 2025 brought the rates on 10-year home equity loans down from 8.34% to 8.20%. This was a small but important drop. If the economy needs it, more rate cuts are still possible. This makes you think strategically: should you lock in your rate now, or wait and hope that rates go down even more? It depends on how much time you have and how much risk you are willing to take. Locking in your rate gives you peace of mind if you need money right away and the current rates work for your budget. If you can wait a few months and are okay with the risk of rates going up, waiting might save you money. I tell people that if the difference in rates is only 0.25% to 0.5%, the peace of mind that comes with having a locked-in, guaranteed rate is often worth more than the money you could save by waiting. Even professionals find it hard to time the market. Instead of trying to get the lowest rate possible, lock in when rates meet your needs.
Depending on how you use the money, the interest on a home equity loan may be tax deductible. However, the Tax Cuts and Jobs Act changed the rules a lot. Before 2018, you could fully deduct the interest on a home equity loan no matter how you used the money. According to the IRS, you can only deduct interest if you use the loan to buy, build, or make major improvements to the home that secures the loan. The interest is not deductible if you use your home equity to pay off debt, pay for school, or for any other reason. The limit on deductions also changed. For loans taken out after December 15, 2017, the total amount of mortgage debt that can be deducted for both mortgage and home equity interest is limited to $750,000 ($375,000 if married filing separately). The limit stays at $1 million ($500,000 if you are married and filing separately) for loans taken out before that date. You should definitely talk to your CPA or tax advisor about your situation because I'm not a tax expert. But knowing these basic rules will help you figure out how much your loan really costs and whether borrowing against your home's equity is a good idea compared to other options.
Here's what this means for you: You can get a home equity loan with bad credit in 2025, but you need to plan ahead and have realistic expectations about the terms. Most lenders want credit scores of at least 620–640 for HELOCs and 680 for traditional home equity loans. However, there is some room for flexibility depending on the percentage of equity, income, and DTI. To get a home equity loan from AmeriSave, you need a median FICO score of at least 680. The LTV ratios are based on your credit profile. If you have a lower credit score, you will usually have to pay 0.5 to 1.5 percentage points more in interest than the prime rate. This means that if you take out a $50,000 loan for 15 years, you will have to pay an extra $40 to $60 each month or $7,000 to $11,000 in extra interest over the life of the loan. The best way to get approved is to do a few things at once: keep your credit card use below 30%, keep your home equity at least 15–20%, keep your DTI below 43%, and give full documentation of your income and assets.
LendingTree says that credit scores can go up within 30 to 45 days of taking positive steps. With focused effort, scores can go up by 20 to 50 points in 3 to 6 months. There are other choices when regular home equity loans are just out of reach. HELOCs usually have lower credit requirements and may offer better rates, even though prices can change. Cash-out refinancing is a good option for borrowers who don't want to raise their primary mortgage rate too much. Even though personal loans have higher rates, they give you access to money faster. If someone who is qualified is willing to help, co-signers can fill in the gaps. The most important choice is whether to get a home equity loan now with your current credit or wait a few months to improve your profile first. You can save thousands of dollars in interest by raising your credit score by 30 to 50 points if you can wait three to six months and your main need isn't urgent. If you need access right away and you meet the requirements, it makes sense to move forward.
The Federal Reserve Bank of St. Louis says that as of the second quarter of 2025, American homeowners had almost $35 trillion in equity. Your share of that equity is real money that you can get to even if you have trouble getting credit. The question isn't whether you can use your equity; it's how to do it in a way that costs the least and gives you the most benefit.
AmeriSave has competitive rates and a simple online application process when you're ready to look into your home equity loan options. Our home equity loan lets you borrow between $45,000 and $500,000 for 10 or 20 years. To qualify, you need a FICO score of at least 680. First, check your credit score and get your financial documents in order. These include recent pay stubs, W-2 forms, bank statements, and an estimate of how much your home is worth right now. This preparation will help you get things done quickly when you're ready to apply. You can also call (833) 326-6018 to talk to one of our Home Loan Experts about your situation and find out which loan option is best for you.
Okay, here's what I want to say. It's not a fairy tale to get a home equity loan with bad credit; thousands of homeowners do it every year. Yes, you'll have to pay higher rates and be looked at more closely than people with good credit. But that doesn't mean the door is locked. Check your credit reports for mistakes and fight them hard. Pay down your credit card balances to less than 30% of their total amount. Make sure every payment is made on time for at least 3 to 6 months. Collect all the paperwork you need to show that you have a steady income and are managing your money well. Then, figure out how much you can realistically borrow based on your equity and DTI. CBS News says that home equity loan rates are currently around 8.2% for qualified borrowers. This is a lot better than other options like personal loans at 12% or credit cards at 21%. Even if you have to pay a higher interest rate of 9% to 9.5% because of credit problems, you can still save a lot of money compared to borrowing money without collateral. The equity in your home is real wealth that you've built up over the years by making mortgage payments and the value of your home going up. If you have a credit score in the 600s, don't let it make you think that money is out of reach. It just takes planning, patience, and hard work. Take it one step at a time. Look at your credit this week. If you find any mistakes, dispute them. Make a plan to pay off your debts. In three to six months, you'll probably be in a much better place to apply and get terms that really help you reach your financial goals. By showing up and making payments every month, you've built equity in your home. It's time to put that equity to work for you, even if your credit isn't perfect. I know from years of working on these projects that you don't need perfect credit, but you do need a good plan.
Here's what this means for you: You can get a home equity loan with bad credit in 2025, but you need to plan ahead and have realistic expectations about the terms. Most lenders want credit scores of at least 620–640 for HELOCs and 680 for traditional home equity loans. However, there is some room for flexibility depending on the percentage of equity, income, and DTI. To get a home equity loan from AmeriSave, you need a median FICO score of at least 680. The LTV ratios are based on your credit profile. If you have a lower credit score, you will usually have to pay 0.5 to 1.5 percentage points more in interest than the prime rate. This means that if you take out a $50,000 loan for 15 years, you will have to pay an extra $40 to $60 each month or $7,000 to $11,000 in extra interest over the life of the loan. The best way to get approved is to do a few things at once: keep your credit card use below 30%, keep your home equity at least 15–20%, keep your DTI below 43%, and give full documentation of your income and assets. LendingTree says that credit scores can go up within 30 to 45 days of taking positive steps. With focused effort, scores can go up by 20 to 50 points in 3 to 6 months. There are other choices when regular home equity loans are just out of reach. HELOCs usually have lower credit requirements and may offer better rates, even though prices can change. Cash-out refinancing is a good option for borrowers who don't want to raise their primary mortgage rate too much. Even though personal loans have higher rates, they give you access to money faster. If someone who is qualified is willing to help, co-signers can fill in the gaps. The most important choice is whether to get a home equity loan now with your current credit or wait a few months to improve your profile first. You can save thousands of dollars in interest by raising your credit score by 30 to 50 points if you can wait three to six months and your main need isn't urgent. If you need access right away and you meet the requirements, it makes sense to move forward. The Federal Reserve Bank of St. Louis says that as of the second quarter of 2025, American homeowners had almost $35 trillion in equity. Your share of that equity is real money that you can get to even if you have trouble getting credit. The question isn't whether you can use your equity; it's how to do it in a way that costs the least and gives you the most benefit.
AmeriSave has competitive rates and a simple online application process when you're ready to look into your home equity loan options. Our home equity loan lets you borrow between $45,000 and $500,000 for 10 or 20 years. To qualify, you need a FICO score of at least 680. First, check your credit score and get your financial documents in order. These include recent pay stubs, W-2 forms, bank statements, and an estimate of how much your home is worth right now. This preparation will help you get things done quickly when you're ready to apply. You can also call (833) 326-6018 to talk to one of our Home Loan Experts about your situation and find out which loan option is best for you.
Okay, here's what I want to say. It's not a fairy tale to get a home equity loan with bad credit; thousands of homeowners do it every year. Yes, you'll have to pay higher rates and be looked at more closely than people with good credit. But that doesn't mean the door is locked. Check your credit reports for mistakes and fight them hard. Pay down your credit card balances to less than 30% of their total amount. Make sure every payment is made on time for at least 3 to 6 months. Collect all the paperwork you need to show that you have a steady income and are managing your money well. Then, figure out how much you can realistically borrow based on your equity and DTI. CBS News says that home equity loan rates are currently around 8.2% for qualified borrowers. This is a lot better than other options like personal loans at 12% or credit cards at 21%. Even if you have to pay a higher interest rate of 9% to 9.5% because of credit problems, you can still save a lot of money compared to borrowing money without collateral. The equity in your home is real wealth that you've built up over the years by making mortgage payments and the value of your home going up. If you have a credit score in the 600s, don't let it make you think that money is out of reach. It just takes planning, patience, and hard work. Take it one step at a time. Look at your credit this week. If you find any mistakes, dispute them. Make a plan to pay off your debts. In three to six months, you'll probably be in a much better place to apply and get terms that really help you reach your financial goals. By showing up and making payments every month, you've built equity in your home. It's time to put that equity to work for you, even if your credit isn't perfect. I know from years of working on these projects that you don't need perfect credit, but you do need a good plan.
Most lenders want a credit score between 620 and 680, but the requirements differ a lot from one lender to the next. The Mortgage Reports say that a lot of lenders will accept scores as low as 620, but some want scores of 680 or higher. Some banks will go as low as 640. For home equity loans at AmeriSave, you need a median FICO score of at least 680. If your score is between 680 and 699, you can get up to 80% LTV. If your score is between 700 and 739, you can get up to 85% LTV. If your score is 740 or higher, you can get up to 90% LTV. The score you need also depends on other things in your application. A borrower with a 640 score, 40% equity, a good income, and a 30% DTI might be approved, but someone with a 680 score, 15% equity, and a 48% DTI would not.
There are a number of options that can help you get money or make ends meet while you work on your credit. HELOCs usually have lower credit score requirements than regular home equity loans, around 620 to 640 compared to 680 to 700. With cash-out refinancing, you get a bigger mortgage and cash for the difference. If the current mortgage rates are close to what you're already paying, this might work, but you will need to meet the requirements for refinancing. Personal loans don't require home equity and are processed faster, but they have higher interest rates, usually 12–18% compared to 8–9% for home equity. They are good for small amounts or as a temporary fix while you work on your credit. Having a co-signer can greatly increase your chances of getting approved. Adding the co-signer's income to your DTI calculation and their good credit can help you get over your credit problems. Lastly, some local credit unions and community development financial institutions have less strict qualification requirements than big national lenders, especially for members who have been with them for a long time.
The main benefit is that you can get financing with lower interest rates than unsecured options. Home equity loans usually have interest rates that are 3 to 9 percentage points lower than those of personal loans or credit cards. You get the whole amount right away in one payment, can use it for almost anything, and your monthly payments stay the same. CBS News says that even with bad credit, the average interest rate on home equity loans in November 2025 is about 8–9%, which is a lot better than the 12% average for personal loans or the 21% median for credit cards. The main drawbacks have to do with cost and risk. You could lose your home if you don't make your payments on time. If you have bad credit, you'll pay higher interest rates than people with good credit. This could cost you thousands of extra dollars over the life of the loan. You'll also have to pay closing costs of 2% to 5% of the loan amount, which is not the case with personal loans. And since it's a second mortgage, you now have to make two mortgage payments each month instead of just one, which makes your monthly obligations bigger. The most important question is whether the lower interest rate makes up for the risk of foreclosure and the extra costs. The answer is usually yes if you need a lot of money for home repairs or to pay off high-interest debt. Alternatives might make more sense for smaller amounts or spending that isn't necessary.
If my credit gets better, can I refinance my home equity loan later? Yes, but the process and benefits depend on the state of the market and how much your credit improves. You can refinance home equity loans just like you can primary mortgages. If your credit score goes up by 40 to 60 points or more, like from 660 to 720, you might be able to refinance into a new home equity loan with a much lower interest rate. You have to fill out a new application, have your credit checked, prove your income, and maybe even get a new appraisal. You also have to pay closing costs again. Three things will help you decide if refinancing makes sense: how much better your rate is, how much you still owe on the original loan, and how long you plan to keep the loan. As a general rule, if you can save at least 1% on your interest rate by refinancing and you plan to keep the loan for at least 2–3 more years, the closing costs are usually worth it. If you improve your credit enough and the market is good, you could also do a cash-out refinance on your main mortgage. This would pay off the home equity loan and combine it with your other mortgage payments into one. Some lenders have streamlined refinance programs for current customers with better credit that don't require as much paperwork or lower closing costs. Once your credit score goes up a lot, talk to your lender about these choices.
The time frame depends on your situation and the lender's procedures, but borrowers with bad credit should expect to go from application to closing in 2 to 6 weeks. The first application and credit check usually take one to three business days. At this point, the lender checks your credit, looks over your application information, and decides if you meet the basic requirements. If you have bad credit, this review might take longer because underwriters will look at your whole financial picture more closely. Scheduling and finishing the home appraisal adds one to two weeks. To figure out your equity and LTV ratios, the lender needs to know how much your home is worth right now. The time it takes to get an appraisal depends on the local market and the appraiser's schedule. It takes another 3 to 7 business days for the underwriting review. This is where your whole application, including proof of income, proof of assets, and credit history, is carefully looked over. If you have bad credit, you should expect to be asked questions or asked for more paperwork, which could make this phase last longer. It takes 3 to 5 business days to get final approval and set a closing date. After your loan is approved by underwriting, the closing documents are made and a title company or lawyer sets a date for the closing. In general, borrowers with good credit and simple applications might be able to close in two to three weeks. People with bad credit and complicated finances should expect to wait 4 to 6 weeks. If you plan ahead, you'll have the best chance of meeting your deadline without having to rush into bad terms.
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