Home Equity Loan with Bad Credit: Your Options Below a 600 Score (2026)

In this Article

• What Are Your Home Equity Options with a Credit Score under 600?
• Can You Get a Home Equity Loan with Bad Credit?
• What Debt-to-Income Ratio Do You Need for a Home Equity Loan?
• Can You Get a Home Equity Investment with Bad Credit?
• Can You Get a HELOC with a Credit Score under 600?
• Can You Get a Cash-Out Refinance with Bad Credit?
• Should You Use a Hard Money Loan to Tap Home Equity?
• What Else Do Lenders Check besides Your Credit Score?
• Should You Use Home Equity to Consolidate Debt with Bad Credit?
• How Do You Get Approved for Home Equity with Bad Credit?
• Home Equity with Bad Credit FAQ

A credit score under 600 does not erase the equity in your home, but it does change who will give you access to it. Most banks and credit unions set their home equity floors well above 600, so a lower score often ends in a quick no. You still have options. Some work around your score, and one works around monthly payments altogether. This guide walks through each option, what it costs, and the approval rules that trip people up even when the score is fine.

Home equity is not the right tool for every situation. If you are behind on your mortgage, facing foreclosure, have little equity left, or need money to cover a monthly shortfall that will keep coming back, a new obligation tied to your home may not fix the problem. A HUD-approved housing counselor or a nonprofit credit counselor can help you sort out options first, usually for free.

If your score is in the 600s and you live in Arizona, see our guide to home equity with fair credit in Arizona for local lenders and state rules.

What Are Your Home Equity Options with a Credit Score under 600?

With a credit score under 600, your main home equity options are a home equity investment, a portfolio or non-QM second mortgage or HELOC, an FHA or conventional cash-out refinance, and a hard money loan. None is easy, but an HEI is the only one without a monthly payment to qualify for.

Terms as of September 2026. Every lender and company sets its own rules; confirm directly.

Can You Get a Home Equity Loan with Bad Credit?

Yes, but with a score under 600, a traditional home equity loan or HELOC is hard to find, and the options that remain usually cost more or ask more of you.

A home equity loan gives you one lump sum with a fixed monthly payment. A HELOC, or home equity line of credit, works more like a credit card backed by your home: you draw what you need and pay interest on what you use, usually at a variable rate. Both are second mortgages, and both are loans you repay every month.

Most lenders want a score of at least 620 to 680 for either one. Below 600, the list of lenders that will take your application gets short, and the ones that do charge more for the risk. For the full list of standard rules, see our guides to home equity loan requirements and HELOC qualification.

What Debt-to-Income Ratio Do You Need for a Home Equity Loan?

Most home equity lenders cap your debt-to-income ratio somewhere between about 43% and 50%, and a low credit score makes that limit harder to meet.

Debt-to-income ratio, or DTI, is the share of your monthly income before taxes that goes to debt payments. It can block a loan even when you have plenty of equity. Here is how it works. Add up your monthly debt payments, including your mortgage, car loan, card minimums and the new loan’s payment. Then divide by your monthly income before taxes. If you earn $6,000 a month and those payments total $2,700, your DTI is 45%.

A low score hurts twice here. Lenders charge a higher rate for more risk, and a higher rate makes the monthly payment bigger. That bigger payment pushes your DTI up, which can sink an application that looked fine on equity alone.

Can You Get a Home Equity Investment with Bad Credit?

Yes, for some homeowners with scores between 500 and 599, a home equity investment (HEI) can be easier to qualify for than a HELOC or home equity loan, because there is no new monthly payment to underwrite. Easier is not the same as automatic.

Curious if an HEI makes sense for your situation? You can pre-qualify in minutes without impact to your credit. Check Your Eligibility →

An HEI is not a loan. A company gives you cash now, and you settle with a payment tied to your home’s value later, when you sell, refinance, buy out the agreement, or reach the end of the term. Because there is no monthly payment, HEI companies don’t judge you on income and DTI the way a lender does. Point and Splitero both say they have no income requirement. Point, Nada, and Splitero publish a 500 minimum credit score, while Hometap sets its floor higher.

A 500 score only gets you in the door. Every company also checks how much equity you will keep after the investment, where it would sit behind your other liens, whether your home type qualifies, and your recent mortgage and credit history. See how much equity an HEI requires.

The trade-off is cost. You give up part of your home’s future value, and the settlement can be large if your home rises in value or you settle early. Most HEIs limit that with a safety cap, but the cap is a high ceiling, not a low price. For company-by-company credit floors and terms, see our full guide to HEI credit score requirements.

Can You Get a HELOC with a Credit Score under 600?

You can get a HELOC or second mortgage below 600, but only through a small group of lenders, mostly portfolio or “non-QM” lenders, and the terms reflect the risk.

Non-QM means non-qualified mortgage. These loans don’t meet the federal definition of a “qualified mortgage,” but they are still regulated, and lenders still have to check that you can repay. What differs is that each lender sets its own credit, income and documentation rules. Many of these programs are fixed second mortgages rather than HELOCs, and many still start around 620 to 660. If you find one that accepts a sub-600 score, expect:

• A rate well above the averages on our Arizona home equity rates page
• A lower borrowing limit, since lenders often cap your total debt at a smaller share of your home’s value when your score is low
• More fees and more paperwork, including full proof of income, and sometimes a prepayment penalty

Because these are loans, you still have to pass a DTI test. A high rate on a large balance can make that hard, even with plenty of equity.

Can You Get a Cash-Out Refinance with Bad Credit?

Yes, a cash-out refinance is achievable below a 600 score, but because it replaces your primary mortgage entirely, it is rarely cost-effective if your current mortgage carries a low interest rate.

• FHA Cash-Out Refinance: FHA permits cash-out refinancing down to a 500 score (up to 80% LTV), but most lenders enforce “overlays” requiring 580 to 620+. Approval requires 12 consecutive months of on-time mortgage payments, plus both an Upfront (1.75%) and Monthly Mortgage Insurance Premium (MIP).
• Conventional Cash-Out Refinance: Fannie Mae’s Desktop Underwriter no longer auto-rejects scores under 620, evaluating the profile holistically. However, individual lenders may still enforce 620+ overlays, and automated approval requires strong compensating factors like low DTI or high cash reserves.
• The Rate Trade-Off: A cash-out refi resets your entire balance at current market rates. Swapping a 3.5% rate on a $220,000 balance for today’s market rate increases monthly borrowing costs across your whole mortgage, not just the extra cash you draw out. For a side-by-side look, see HEI vs cash-out refinance.

Should You Use a Hard Money Loan to Tap Home Equity?

Hard money loans should generally be considered a last resort for primary residences due to high fees, short repayment windows, and risk of property loss.

Hard money providers are private lenders evaluating the underlying asset value over borrower credit profiles. While credit score requirements are minimal, these loans feature:

• Short term lengths (typically 1 to 3 years).
• Interest-only monthly structures ending in a full principal balloon payment.
• Significantly higher interest rates and origination points.

If you are unable to refinance or sell the property before the balloon payment matures, the property risks foreclosure. Always verify consumer disclosure terms, as business-purpose loan structures on owner-occupied residential properties lack standard consumer protection rights. Hard money is primarily structured for real estate investors with clear short-term exit strategies rather than primary homeowners managing personal debt.

What Else Do Lenders Check besides Your Credit Score?

In addition to credit scores, home equity lenders and HEI providers inspect mortgage payment consistency, public records, and seasoning periods following major credit events.

1. Recent Mortgage History

For an FHA cash-out refinance, every mortgage payment over the past 12 months must have been made within the month it was due (no 30-day late payments). HEI companies manage mortgage delinquency with specific rules:

• Point: Requires any active delinquency over 30 days past due to be fully paid off at closing using investment proceeds.
• Nada: Requires primary mortgages to be fully current at time of funding.
• Splitero: Disqualifies applications displaying more than two notices of default or any notice of trustee sale within the past 12 months.

2. Bankruptcy and Foreclosure Seasoning Rules

Standard minimum waiting periods following credit events vary by program:

Point, Splitero and Nada from their published requirements, FHA from HUD Handbook 4000.1, conventional from Fannie Mae’s Selling Guide. Chapter 13 and multiple filings follow different rules; Point, for example, uses 1 year after a Chapter 13 discharge and 5 years for multiple filings in 7 years, while Splitero uses 2 years after a Chapter 13 discharge or 4 years after a dismissal. Documented hardship can shorten some waits, and lenders can add their own. Confirm directly before you apply.

3. Liens and Judgments

Tax liens and court judgments must generally be satisfied prior to or at closing. Most lenders and HEI companies permit involuntary liens to be paid directly out of closing proceeds, reducing net cash to the borrower.

4. Property Eligibility

Property type, location, condition, and marketability impact approval. Most HEI providers restrict funding on rural properties, manufactured housing, or homes with structural deferred maintenance.

Should You Use Home Equity to Consolidate Debt with Bad Credit?

Shifting high-interest credit card debt into a home equity product can lower average interest costs, but it converts unsecured personal debt into a secured obligation tied directly to your primary residence.

• Unsecured Debt (Credit Cards): Defaulting damages credit scores and leads to collections, but does not trigger home loss directly.
• Secured Debt (Second Mortgages / Refinances): Defaulting on monthly payments can lead to foreclosure proceedings.
• HEI Settlements: While an HEI avoids monthly payments, a lien is recorded against your title that must be satisfied at maturity, sale, or refinance.

Before consolidating, evaluate total borrowing costs across your anticipated hold period rather than evaluating monthly payment amounts alone. Ensure that consolidating credit cards is accompanied by strict spending adjustments so card balances do not accumulate again alongside the new home obligation.

How Do You Get Approved for Home Equity with Bad Credit?

Your best chance of approval comes from fixing your mortgage history first, knowing your real equity, and prequalifying before any hard credit check.

1. Check your mortgage history. Pull your free credit reports and confirm your last 12 mortgage payments show as on time. Dispute any errors before you apply.
2. Estimate your usable equity. Multiply your home’s value by the limit a company uses, then subtract what you owe. On a $400,000 home with a $220,000 mortgage, a 70% limit leaves about $60,000. Our home equity calculator does the math for you.
3. Ask about soft and hard credit checks. Before you prequalify, ask whether the company uses a soft credit check, which does not affect your score, and when it would run a hard check, which can.
4. Gather your documents. Loans need proof of income. HEIs usually ask for ID, mortgage statements and proof of homeowners insurance.
5. Compare offers the same way. Put a loan’s total interest over your planned hold next to an HEI’s estimated settlement for the same year. Our home equity loan vs HEI guide walks through that comparison.

Wondering if a no monthly payment HEI option is right for you? Nada shows you in about two minutes, with only a soft credit check. [ Check Your Eligibility with Nada → ]

Home Equity with Bad Credit FAQ

EquitySquirrel is an educational resource operated by Scout Media LLC, not a lender or HEI provider. This content does not constitute financial, legal, or investment advice. HEI terms vary by provider and are subject to change; confirm current terms directly. Consult a licensed financial professional before making decisions about your home equity. Aleksandra Kadzielawski, Lic #SA694336000.