Homeowners with credit scores below 620 can still access home equity financing through targeted strategies, including improving creditworthiness, leveraging co-signers, and exploring specialized lenders. These approaches may unlock up to 85% of home equity for loan purposes.
- Credit scores below 620 are common barriers, but improvements of 50–100 points can improve approval chances
- Co-signers with FICO scores above 700 may enable loan approvals with up to 85% LTV
- Specialized lenders may approve loans with lower credit thresholds and offer amounts from $20,000 to $250,000
- HELOCs offer flexible access to equity with potentially lower credit requirements than traditional home equity loans
- Interest rates on home equity loans for subprime borrowers typically range 2–5 percentage points above prime
- Debt-to-income ratios under 36% are often required for co-signer-based approvals
Homeowners facing credit scores under 620 often encounter hurdles when applying for home equity loans, but several actionable strategies can increase approval odds. Lenders typically require a minimum FICO score of 620, with prime rates offered to borrowers above 740. However, alternative pathways exist for those in lower credit brackets. Borrowers can improve their credit profile by paying down revolving debt, correcting inaccuracies on credit reports, and maintaining consistent payment histories for at least six months prior to application. A credit score improvement of 50–100 points can significantly enhance eligibility. For instance, raising a score from 590 to 640 may qualify applicants for lenders that previously rejected them. Another viable route involves adding a co-signer with strong credit and stable income. Co-signers with FICO scores above 700 and a debt-to-income ratio under 36% can help offset credit risk. Some lenders allow up to 85% loan-to-value (LTV) ratios when a co-signer is involved, enabling borrowers to access more than $100,000 in equity on a $200,000 home. Specialized lenders, such as credit unions and non-traditional financial institutions, frequently offer more flexible terms than national banks. These institutions may consider income verification, employment history, and home equity depth over credit scores alone. Loan amounts can range from $20,000 to $250,000, with interest rates typically 2–5 percentage points above prime. Finally, borrowers can consider home equity lines of credit (HELOCs) as an alternative. HELOCs often have lower upfront credit requirements and provide access to funds as needed, though variable rates may increase monthly payments over time.