Best HELOC for Bad Credit

Bad credit could make securing a home equity line of credit (HELOC) more challenging. Along with the amount of equity you have in the home, lenders consider your credit history when making approval decisions. Poor credit can narrow the range of loan options you have to choose from.

If you’re interested in tapping your home equity, we’ve put together a list of lenders that offer a HELOC for bad credit. We’ll also suggest alternatives to HELOCs when you need to borrow. 

In this guide:

• How bad credit affects a HELOC
• HELOC lenders for bad credit
• How to apply for a HELOC with bad credit
• HELOC alternatives for bad credit

How bad credit affects a HELOC

A HELOC is a revolving credit line secured by your home equity. Equity is the difference between what you owe on your home and what it’s worth. Once approved for a HELOC, you can draw on your credit line as needed, and you only pay interest on the portion you use. 

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 widely used. On the FICO scale, a “bad” or poor credit score is generally anything below 580. 

Bad credit can affect a HELOC in different ways. Getting a HELOC for bad credit can mean:

• Paying a higher interest rate, which can make your credit line more expensive.
• Paying an annual fee or other fees the lender requires. 
• Being assigned a lower credit limit or less favorable repayment terms. 

You only pay interest on the part of your HELOC you use, but a higher rate can increase the total cost of borrowing. Depending on how much you borrow, the difference between a good credit score and a bad one could mean paying thousands more in interest. 

HELOC lenders for bad credit

Shopping around is important when you want a HELOC but have bad credit. It’s an opportunity to weed out lenders you may not qualify for based on their minimum credit score requirements. Comparing HELOCs can also give you perspective on the kind of rates and terms you may be able to get. 

When choosing a HELOC lender, it’s important to understand:

• How much you might be able to borrow
• What interest rates you might pay
• Whether rates are fixed or variable
• What fees, if any, may apply
• How soon you can access your credit line if approved
• How long you can draw from your credit line and how long the repayment period lasts

You may also want to consider whether a HELOC lender offers any special benefits, such as an autopay rate discount. Even a slight reduction in your rate could help you save a sizable amount in the long run. 

Here’s a quick glance at the best lenders that offer HELOCs for bad credit. Click the lender’s name in the table to read more about our take on its HELOC for borrowers with poor credit or no credit history.

HELOC	Minimum credit score
Figure	640 in most states
Spring EQ	620
Hitch	620
Bethpage FCU	670

As you might notice, the minimum credit score for a HELOC seems to be higher than for many personal loans and other types of credit.

Our expert’s take

Erin Kinkade

CFP®

In general, lending has become tighter since 2021, as 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.

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Figure – Best overall 

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LendEDU editorial rating: 4.9 out of 5

• Borrow up to $400,000
• One-time origination fee
• Funding in as little as 5 days

Figure offers HELOCs of up to $400,000 to borrowers with credit scores of 640 or better, which is considered fair credit on the FICO scale. You can check your rates without affecting your credit scores, but submitting a full application will result in a hard credit pull. This can lower your credit score and affect your credit report, but you should see your score recover in about six months or after making on-time payments when the repayment period begins.

You’ll pay no closing costs or out-of-pocket costs, but Figure might charge a one-time origination fee. Once you’re approved, it can take up to five days to get access to your home equity loan—faster than many other lenders. You can also take advantage of a 100% redraw, meaning you can borrow up to your full credit line once you repay your initial draw. 

• Minimum credit score: 640 in most states
• APR: 8.95% – 16.90%
• Loan amount: $20,000 – $400,000
• Draw period: 5 years
• Fees: 0% – 4.99% origination fee
• Funding time: Up to 5 days

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Spring EQ – Best multi-product application

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LendEDU editorial rating: 4.3 out of 5

• Borrow up to $500,000
• Administration and annual fees apply
• Lower minimum credit score requirement

Spring EQ accepts borrowers with a minimum credit score of 620 and offers HELOCs up to $500,000. HELOCs have a 10-year draw period in which you can access funds and a 20-year repayment period. You can borrow more with Spring EQ, but its average funding speed is slower than Figure’s. 

Costs include an administration fee and an annual fee. You’re also responsible for paying third-party fees, including a professional appraisal of your home’s value. The typical funding speed is 21 days. If you’re unsure whether a home equity loan or HELOC is right for you, Spring EQ might be the perfect lender: It allows you to see rates for both products with one application.

• Minimum credit score: 620
• APR: Not disclosed
• Loan amount: $25,000 – $500,000
• Draw period: 10 years
• Fees: $195 loan administration fee; $99 annual fee
• Funding time: 21 days on average

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Hitch – Best for fast funding

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LendEDU editorial rating: 4.4 out of 5

• Borrow up to $500,000 or 95% of home equity
• Multiple draw period options
• Rate discounts available

Hitch extends HELOCs to borrowers with credit scores as low as 620. It’s possible to borrow up to $500,000 or 95% of your home equity, whichever is greater. You’ll pay a 2.5% origination fee for a Hitch HELOC, as well as an underwriting fee. 

In terms of interest rates, Hitch’s are among the lowest—a plus if you’re looking for a HELOC for bad credit. You can also choose between multiple draw period options and a 10-year or 30-year repayment term. It takes 21 days on average to get funded. 

• Minimum credit score: 620
• APR: 7.75% – 13.00% 
• Loan amount: Up to $500,000
• Draw period: 2, 3, 4, 5, or 10 years
• Fees: 2.5% origination fee; $500 – $1,000 underwriting fee
• Funding time: 21 days on average

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Bethpage FCU – Best credit union

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LendEDU editorial rating: 4.2 out of 5

• Borrow up to $1 million
• Introductory fixed rate
• No upfront fees and no closing costs on HELOCs up to $500,000

Bethpage FCU offers HELOCs up to $1 million, which may be ideal for borrowers with higher-value homes. However, you’ll need a minimum credit score of at least 670 to qualify. If your score is below that, you may need to work on improving it to increase your approval odds. 

Bethpage is fee-friendly, with no application, origination, or appraisal fees. If approved, you can enjoy a low, fixed introductory rate. You’ll have a 10-year draw period to access your credit line, followed by a 20-year repayment period. 

• Minimum credit score: 670
• APR: 12-month introductory rate starting at 6.99%, with variable post-introductory rates starting at 8.50%
• Loan amount: $10,000 – $1 million
• 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

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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:

• Pay down debt. Reducing your outstanding debt could add points to your credit score if you’re reducing your credit utilization ratio. You can also improve your debt-to-income (DTI) ratio, another factor HELOC lenders can consider for approval. 
• 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 that’s reporting the information could help make a positive difference to your score if the error is corrected or removed. 
• 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. 

Once you’re ready to start shopping 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 your rates, which won’t affect your credit scores.

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 they recommend and want to see improved on your credit report to approve your loan request

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: 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 APR—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. For instance, if you planned to get a HELOC to fund a kitchen renovation, you might be able to cover those costs with a credit card instead. 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 having to undergo 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.