Best HELOCs for Bad Credit Score (580 or Lower)

Bad credit is defined as a FICO score below 580, but most HELOC lenders set the bar high, requiring a score of 680 or more. While getting a HELOC with poor credit is possible, be prepared for higher interest rates, smaller credit lines, or shorter repayment terms.

Lenders look at more than your credit score; they also base decisions on the amount of equity in your home, your employment history, and your income, plus how your monthly debt payments compare to your income. Here are two HELOC lenders with more flexible credit requirements.

A HELOC is a revolving line of credit secured by your home equity. Equity is the difference between the current value of your home and what you owe on the property. Most lenders require at least 15% home equity to qualify for a HELOC. 

You can typically borrow 85% of your home equity. In addition to home equity, your income, debt-to-income ratio (DTI), and credit score determine your credit limit. 

Once approved for a HELOC, you can draw on your credit line as needed, only paying interest on the portion you use. This is the draw period, which often lasts five to 10 years. After the draw period ends, you enter the repayment period of 10 to 20 years where you repay both the principal balance and interest.  

HELOCs are a popular form of borrowing because they give homeowners access to a flexible line of credit, but securing a HELOC if you have bad credit can be difficult. Here are lenders known for working with borrowers who have less-than-perfect credit. 

Our expert’s take

Erin Kinkade

CFP®

In general, lending has become tighter since 2021; interest rates have risen due to the Federal Reserve raising rates. In an effort to avoid an environment similar to the 2007 to 2009 Great Recession and housing crisis, lenders—particularly with first and second mortgages—want to ensure they’re loaning to reliable borrowers.

Figure

Best Overall

4.9 _/5

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Why it’s one of the best

Figure provides HELOCs to borrowers with fair credit, requiring a minimum credit score of 640. With no out-of-pocket costs and a quick funding timeline, Figure is a solid option for borrowers with less-than-stellar credit who need funds fast.

One important factor to consider is that Figure requires you to draw 100% of your loan amount at origination. This might not be ideal if you’re looking for more flexibility with your withdrawals but can be helpful if you need the full amount up front.

Another major advantage of Figure is its 100% redraw option, allowing borrowers to re-borrow up to their credit limit once they repay their initial draw. This feature can be useful for those who may not qualify for larger lines of credit due to bad credit but still need access to funds over time.

• No closing or out-of-pocket costs
• Funding in as little as 5 days
• 100% redraw option

• One-time origination fee
• Requires 100% draw at origination
• Minimum 640 credit score

HELOC details

Min. credit score	640
Rates (APR)	6.95% – 15.55%
Loan amount	$20,000 – $400,000
Max. LTV	85%
Draw period	5 years
Fees	0% – 4.99% origination fee

Bethpage FCU

Best Credit Union

4.7 _/5

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Why it’s one of the best

Bethpage FCU offers HELOCs up to $1 million, but it also caters to borrowers with lower credit scores by offering flexibility in its underwriting. A score of 670 is generally required, but Bethpage might consider borrowers with lower credit scores, particularly if they have strong equity or a low debt-to-income ratio.

Bethpage is fee-friendly, with no application, origination, or appraisal fees, which can make it an attractive option for those with bad credit who want to avoid upfront costs.

• No upfront fees
• Large loan amounts up to $1 million

• Requires a minimum credit score of 670
• Longer funding timeline (34 days on average)

HELOC details

Min. credit score	670
Rates (APR)	12-month introductory rate starting at 6.99% for creditworthy borrowers, with variable post-introductory rates starting at 8.50%
Loan amount	$10,000 – $1 million
Max. LTV	85%
Draw period	10 years
Fees	No application, origination, or appraisal fees. No closing costs on lines up to $500,000
Funding time	34 days on average

What is considered bad credit on a HELOC application?

Among other factors, lenders consider credit scores when you apply for a HELOC. FICO credit scores, which range from 300 to 850, are the most common. On the FICO scale, a “bad” or poor credit score is generally anything below 580. 

Your credit score is based on several factors, including your payment history, how much available credit you’re using, the length of your credit history, the mix of credit types being used, and recent inquiries. 

If you have bad credit, it’s likely due to one or more of the following:

• Late or missed payments
• Large debt load
• Defaulting on loans
• Charge-offs or collections
• Bankruptcy or foreclosure
• Numerous hard credit inquiries
• Lack of credit history

Lenders also consider debt-to-income ratio (DTI) when evaluating how creditworthy a borrower is. DTI compares your monthly debt payments to your income to assess your ability to repay a loan. The minimum DTI is typically 43%, which means you spend 43% of your monthly income repaying debt.

Some lenders will allow a 50% DTI, but you could be offered less favorable loan terms. If you’re using more than 50% of your monthly income to repay debt, it’s unlikely you’ll be approved for a HELOC; to lenders, a high DTI is another red flag, just like a low credit score.

Lenders tend to see borrowers with bad credit as a higher risk, so a good credit score is typically a requirement for a HELOC; it indicates to lenders that you have successfully managed debt in the past and you can be trusted to repay any additional debt you take on. 

Credit scores aren’t the only factor lenders take into consideration; you may be able to compensate for bad credit by having significant home equity, steady employment, and a sizable income.

How does a low credit score affect your HELOC?

Bad credit can affect a HELOC in several ways. For example, getting a HELOC for bad credit will likely mean paying a higher interest rate, making your credit line more expensive. 

Interest rates for many HELOCs are variable and based on the federal prime interest rate. The lender takes the prime rate and adds a margin based on your perceived creditworthiness; the higher the risk, the higher the margin—and that equals more interest paid on the loan. 

Here’s how it works:

• Anna has a good credit score of 780. The lender offers her a rate of prime plus 2%. At a prime of 8%, that equals a 10% interest rate. On a $50,000 HELOC with a draw period of five years, Anna will pay $25,000 in interest if she takes out the entire $50,000 at the beginning of the draw period (assuming no change in the prime interest rate).
• Brian has a fair credit score of 620. His lender offers a rate of prime plus 6% for a total of 14%. On the same $50,000 HELOC withdrawn at the beginning of the five-year draw period, Brian will pay $35,000 in interest—$10,000 more than Anna.

Bad credit can also affect the size of your HELOC credit limit. To help mitigate risk, lenders will likely offer you a smaller line of credit compared to someone with good credit. Here’s an example of how this could play out:

• Anna, with a 780 credit score, has $200,000 equity in her home. Her lender will likely agree to let her borrow the maximum of 85%, which is $170,000.
• Brian, with a 620 credit score, also has $200,000 equity in his home. To lower the risk, the lender may only let him borrow 70% of his equity, which equals $140,000. That’s a credit line $30,000 smaller than Anna’s. 

Other terms, such as the length of your draw and repayment periods, could also be shortened because of bad credit. You might even pay an annual fee on the credit line to help compensate for the risk of lending. 

How to choose a HELOC lender if you have bad credit

Shopping around is wise for anyone who’s looking for a HELOC, but it’s crucial if you have bad credit. Here’s what to look for:

• Minimum credit score requirements: Look for lenders with lower minimum credit score requirements, and eliminate those that only deal with good-credit borrowers.
• Flexible criteria: Try to find lenders that advertise flexible criteria, relying more on income, DTI, and equity than credit score to make a lending decision.
• Interest rates: Your interest rates will likely be higher because you have bad credit, so be sure to check multiple lenders to find the best offer.
• Loan amount: When comparing offers, check how much credit each lender is willing to extend, and pick one that offers a credit line you can manage.
• Fixed interest rate: While most HELOCs offer variable rates, you may be able to find one with a fixed rate, providing more predictability so you can better manage your debts.
• Rate discounts: Check to see whether lenders offer a discount for scheduling automatic payments to help save on interest.

When shopping around for a HELOC, be sure to read the fine print on rate quotes. Consider sticking with lenders that only require a soft credit check to show you rates, which won’t affect your credit score.

Bad credit can make it more difficult to secure a HELOC, but it’s not impossible. Be prepared to invest time comparing offers before choosing a lender and completing your application.   

How to apply for a HELOC with bad credit

Applying for a HELOC with bad credit could prove difficult if you don’t meet a lender’s minimum requirements. Consider the following to make yourself a more attractive candidate for a HELOC:

1. Pay down debt. Reducing your outstanding debt could add points to your credit score if you lower your credit utilization ratio. Paying off debts would also reduce your DTI, making you a more attractive prospect to lenders. 
2. Increase home equity. Paying off more of your mortgage increases your home equity. More equity equals more collateral, which reduces lenders’ risk and improves your chances of getting approved for a HELOC. 
3. Check credit report for errors. Credit report errors could cause harm to your score. Reviewing your reports for errors and disputing them with the credit bureau reporting the information could help make a positive difference to your score if the error is corrected or removed. 
4. Consider a cosigner. A cosigner is someone who applies for a HELOC alongside you and assumes equal legal responsibility for the debt. A cosigner could bolster your application and help you qualify for better terms if they have a solid credit score. 

Along with these tips, follow the usual best practices for improving a credit score. That includes paying bills on time, keeping older accounts open, and not applying for new credit that isn’t a necessity.

Can you negotiate for a better HELOC rate despite a low credit score?

Erin Kinkade

CFP®

It’s possible in certain situations. For example, the lender might reconsider your rate if you, or you and a cosigner, can prove that a past hardship caused your credit rating to decline and reflect poorly on your credit report. Examples could include divorce, unexpectedly needing to care for a family member (and using your savings or credit cards), filing for Chapter 7 bankruptcy, or you or your spouse losing your job, resulting in reduced overall income. But keep in mind: You must prove you have recovered from this and have a reliable source of income. It’s worth a shot to negotiate—or wait to apply for a HELOC if it isn’t a critical need. In the meantime, you could build up savings and work on improving your credit score and credit report. You can also ask the lender what it recommends and wants to see improved on your credit report to approve your loan request.

Pros and cons of getting a HELOC with bad credit

Consider the advantages and disadvantages before getting a HELOC if you have bad credit.

Pros

• Borrow as needed

  You don’t need to withdraw the entire amount at once; you only take out funds when you need them.

• Flexible use of funds

  You can use a HELOC for almost anything.

• Interest-only payments during draw period

  You don’t need to pay the principal balance during the draw period, which makes the debt easier to manage early.

• Potential for lower interest rates

  Because most HELOCs offer variable interest, your rates could come down if the prime interest rate is lowered.

Cons

• Higher interest rates

  Borrowers with bad credit are more likely to pay higher interest rates, making your loan more expensive over time.

• Smaller credit limit

  Lenders compensate for the high risk of lending by reducing the size of your home equity line of credit.

• Risk of losing your home

  Because your home is being used as collateral, you may lose it if you fail to make payments on your HELOC.

HELOC alternatives for bad credit

If you’re denied a HELOC due to bad credit, you might consider other possibilities. The first is taking steps to improve your credit scores. It can take time to see results. If you need cash now, you might weigh these options instead. 

• Apply for a personal loan. Personal loans can allow you to borrow up to $100,000, and a number of lenders offer bad-credit loans. Keep in mind that you might pay more in interest or fees to borrow. 
• Look into a home equity investment (aka home equity sharing agreement). These agreements, where an investment company pays a homeowner a lump sum for a share in their future home value—with no monthly payments or interest—tend to have less stringent approval requirements but can be more expensive than a HELOC.
• Consider a credit card. Credit cards can be helpful for financing smaller purchases. Depending on the card, you might be able to earn back some of what you spend in the form of rewards—as points, miles, or cash back. 
• Borrow from your 401(k). If you have a 401(k) at work, you might be able to take a loan against it without a credit check. However, borrowing from your plan can shrink your retirement nest egg and trigger tax consequences if you don’t repay it on time. 

You might also consider asking friends and family for a small loan. Considering every angle can help you find the best option if you can’t get approved for a HELOC because of bad credit.

FAQ

Can I get a HELOC with a 500 credit score?

It’s challenging but possible to get a HELOC with a 500 credit score, but most traditional lenders typically require higher scores. You may need to look for alternative lenders or subprime options that specialize in working with borrowers with poor credit. Expect higher interest rates, stricter terms, and potentially smaller credit limits.

What is the lowest credit score you need for a HELOC?

Most lenders prefer a minimum credit score of around 680 for a HELOC, but some may approve borrowers with scores as low as 600. Subprime lenders might offer HELOCs for scores below 600, but these loans often come with less favorable terms.

What disqualifies you for a HELOC?

Several factors can disqualify you from getting a HELOC, including a low credit score (e.g., below 600 for most lenders), high debt-to-income ratio (DTI), insufficient home equity, inconsistent income, or a history of late payments, foreclosures, or bankruptcies.

What would cause a HELOC to be denied?

A HELOC could be denied if you have insufficient home equity, high DTI, a poor credit history with recent delinquencies, unstable income, or if your property has significant issues that affect its value. The application could be rejected if you don’t meet a lender’s specific requirements, such as minimum income levels.

Does a HELOC damage your credit?

Applying for a HELOC results in a hard credit inquiry, which can lower your credit score by a few points. Once approved, responsibly managing the HELOC, such as making on-time payments, can help improve your credit over time. However, missing payments or overextending your credit can damage your score.

How we selected the best HELOCs for bad credit

Since 2018, LendEDU has evaluated home equity companies to help readers find the best home equity loans and HELOCs. Our latest analysis reviewed 850 data points from 34 lenders and financial institutions, with 25 data points collected from each. This information is gathered from company websites, online applications, public disclosures, customer reviews, and direct communication with company representatives.

These star ratings help us determine which companies are best for different situations. We don’t believe two companies can be the best for the same purpose, so we only show each best-for designation once.

Recap of the best HELOCs for bad credit