How to get a home equity loan with 'bad' credit: A guide

A home equity loan is a helpful way for homeowners to use the equity in their home to borrow money at a lower interest rate. Like any loan, you must meet eligibility requirements, such as a minimum credit score, to qualify. If your credit's taken a hit, it helps to know if you can get a home equity loan with poor credit.

Can you get a home equity loan with 'bad' credit?

Yes, it’s possible. Some lenders allow credit scores as low as 620 for a home equity loan.

Credit scores range from 300 to 850. According to FICO, the national average credit score in 2025 was 715. There’s actually no such thing as “bad” credit, but there are credit score ranges.

Here is the breakdown of how these credit score ranges are categorized:

• Poor: 300 - 579
• Fair: 580 - 669
• Good: 670 - 739
• Very good: 740 - 799
• Excellent: 800 - 850

Even if you’ve done your best to maintain good credit, your credit score may suffer if you lose income or take on debt to pay unexpected expenses. If your credit score isn't so great, you may still qualify for a home equity loan with a high income and significant home equity.

Keep in mind that borrowers with a lower credit score are usually offered higher interest rates on loans, including home equity loans. Improving your credit score can help you secure a better rate when you apply for a loan.

Ways you can improve your credit score include:

• Paying bills on time
• Reducing credit card balances
• Keeping older credit lines open, even if you don’t use them
• Limiting new credit applications
• If you open a new credit line, do it in a way that diversifies your credit mix.
• Dispute errors on your credit report
• Report rent and utilities payments using a credit reporting service
• Open a secured credit card

Credit requirements for Rocket Mortgage 

Rocket Mortgage requires a minimum credit score of 680¹  for a home equity loan. Other lenders may have their own minimum credit score.

Rocket Mortgage offers home equity loans of up to $500,000 with terms of 10–20 years.¹

If you have more questions, connect with one of our Home Loan Experts.

Other key qualifications for a home equity loan

While exact eligibility criteria vary by lender, you’ll typically need the following.

Sufficient equity

A home equity loan is a second mortgage that uses your equity as collateral. Your home equity is the difference between your home's value and the amount you owe on it.

Lenders typically require you to have enough equity to leave some in your home. You often need to leave 15% - 20% equity in your home, which means you need more equity than that to borrow any of it.

If your home is worth $400,000 and you owe $300,000 on the mortgage, you have $100,000 – or 25% – home equity.

It's possible to have negative equity if the value of your home has dropped and you owe more than it’s worth. This is known as an underwater mortgage and means you won’t be eligible for a home equity loan.

Your debt-to-income ratio (DTI)

Your debt-to-income ratio (DTI) shows how much of your gross monthly income goes toward debt payments. Lenders use your DTI to measure whether you can afford an additional loan payment. Lower is better, when it comes to DTI.

You can calculate your DTI by adding your monthly debt payments and dividing by your gross monthly income. To get a home equity loan, you’ll typically need a DTI of less than 50%.

Your loan-to-value ratio

Loan-to-value ratio (LTV) refers to how much of the value of the home you're able to borrow. LTV limits for home equity loans vary by lender.

At Rocket Mortgage, if your credit score is between 680 - 699, you can borrow up to 80% of your home's value. If your credit score is between 700 - 739, you can borrow up to 85%. If your credit score is at least 740, you can borrow up to 90% of your home's value.

Your income and employment history

Lenders need to confirm that you have enough income to afford to repay a second mortgage alongside your primary mortgage. Be prepared to show proof of income and employment, including recent pay stubs, W-2 or 1099 forms, and income tax returns.

6 ways to improve your chances before you apply

While it can be more difficult to qualify for a home equity loan or buy a house with "bad" credit, it’s not impossible. Here are some things you can do to improve your chances of securing a home equity loan with a low credit score.

1. Check your credit score

Before applying for a home equity loan, check your credit. You can get a free copy of your credit report from each credit reporting bureau – Equifax^®, Experian™, and TransUnion^® - at AnnualCreditReport.com. Check for inaccuracies that may be holding back your credit score.

2. Increase your home’s value

One way to increase the amount of equity you can borrow is to boost your home's value. Since equity is the difference between what your home is worth and what you owe on it, you increase your equity by paying down your balance or increasing the value of your home. Your home may increase in value if home prices in your area rise, or if you make improvements that increase its value.

3. Write a letter of explanation 

A letter of explanation is a written statement a borrower provides to a lender to add context to their loan application. For example, if you have gaps in employment or made late payments on your mortgage, a letter of explanation allows you to explain the circumstances. If you lost income but have since found steady employment, you can let your lender know with a letter and improve your chances of approval on your application.

4. Shop around for lenders and interest rates 

Every lender has its own requirements and policies. If you shop around and get a Loan Estimate from several lenders, you’ll often find that each lender offers different terms. One lender might offer a lower interest rate but charge higher up-front fees. Shopping around can help you choose a lender with the best possible terms. If your credit isn’t great, you may not be eligible for a home equity loan with one lender, but you may qualify with another.

5. Consider a co-signer

A co-signer is another person who signs onto the loan and agrees to become legally responsible for its repayment. If you have a co-signer, the lender will consider their credit score and income alongside yours when evaluating your application.

If your credit score is low and your DTI is high, adding a co-signer with good credit and little debt can boost your odds of approval. If you cannot keep up with your second mortgage payments, the co-signer will be responsible for paying the debt - or share the consequences of a default.

6. Consider other loan options

If you have a low credit score and need money quickly, consider other loan options. A personal loan typically comes with a higher interest rate because it’s not secured by collateral. Consider a cash-out refinance, where you replace your current mortgage with a new, larger loan and keep the difference in cash. You'll still need to meet your lender's credit requirements, but it's still possible to refinance with a lower credit score.

Risks of a home equity loan with 'bad' credit

If you have a low credit score, consider the following risks that come with getting a home equity loan:

• Foreclosure. If you cannot keep up with your second mortgage payments, the lender could foreclose on your home. If you’ve struggled to manage debts in the past and might struggle to repay your home equity loan, you could lose your home entirely.
• Higher interest rates and fees. Borrowers with lower credit scores are typically offered higher interest rates. Even if you are approved for a home equity loan, you’ll have to pay more for it.
• Lower borrowing amounts. If you have a low credit score, you may not be able to borrow as much as you need with a home equity loan.
• Risk of being underwater. If you borrow most of your equity and then your property drops in value, you risk an underwater mortgage. This happens when you owe more on your mortgage than the home is worth.

FAQ

Let’s look at some common questions about obtaining a home equity loan with "bad" credit.

Can you pull money out of your house if you have 'bad' credit?

If your credit isn't so hot, it's still possible to borrow your home equity. One option is with a home equity loan or HELOC. If you don't want to take out a second mortgage and make an additional monthly payment, another option is a cash-out refinance. With a cash-out refinance, you replace your current mortgage with a larger loan and receive the difference in cash. The money you borrow still needs to be repaid, but you’ll only have one monthly mortgage payment.

Does a home equity loan require an appraisal?

Home equity loans typically require an appraisal because the lender needs to know how much the property is worth to determine how much equity you have. This will affect not only your eligibility but also how much you can borrow.

What disqualifies you from getting a home equity loan?

Your home equity loan application could be denied if you do not meet your lender’s eligibility criteria on credit, equity, income, or DTI.

How much are closing costs on a home equity loan?

Home equity loans do come with upfront costs. You can expect your closing costs to range anywhere from 3% to 6% the total loan amount.

The bottom line: It’s possible to get a home equity loan with 'bad' credit

If you want to get a home equity loan, you'll need to meet your lender's credit score requirements. However, it's still possible to qualify for a home equity loan with less-than-stellar credit. It can help if you have a high income and low DTI. If your credit score is still too low to qualify, you can work to improve your credit over time. 

When you’re ready, you can start an application for a Home Equity Loan with Rocket Mortgage.

1 Home Equity Loan product requires full documentation of income and assets, credit score and max loan-to-value (LTV), combined loan-to-value (CLTV), and home equity combined loan-to-value (HCLTV) ratios. Requirements were updated 11/19/25 and are tiered as follows: 680 minimum FICO with a max LTV/CLTV/HCLTV of 80%, 700 minimum FICO with a max LTV/CLTV/HCLTV of 85%, and 740 minimum FICO with a max LTV/CLTV/HCLTV of 90%. Your debt-to-income ratio (DTI) must be 50% or below. Valid for loan amounts between $45,000.00 and $500,000.00 (minimum loan amount for properties located in Michigan is $10,000.00). Product is a second standalone lien and may not be used for piggyback transactions. Product not available on Ameriprise products. Guidelines may vary for self-employed individuals. Some mortgages may be considered “higher priced” based on the APOR spread test. Higher priced loans are not allowed on properties located in New York. Additional restrictions apply. This is not a commitment to lend.

Rocket Mortgage is a trademark of Rocket Mortgage, LLC or its affiliates.