If your credit score is below average, here’s some encouraging news: you may still be able to get a home equity loan. That’s because an equity loan works differently from a credit card or a personal loan. It’s backed by your home, and the value you’ve built up in that home — your equity — can help make up for a lower credit score.

The more equity you have, the safer the loan looks to a lender, even if your credit isn’t perfect. Think of your equity as a strong recommendation letter that speaks up for you when your credit score can’t.

What Credit Score Do You Really Need?

There’s no single magic number, because lenders look at more than just your score. Still, it helps to understand the general picture.

Home equity lenders usually want a higher score than you’d need to simply buy a home. That’s because a home equity loan is a second loan on your house — if things go wrong, the first mortgage gets paid before the home equity lender does. To protect themselves, lenders set the bar a bit higher.

That said, many lenders will still work with fair or below-average scores if the rest of your application is strong. According to RefiGuide, some brokers approve HELOCs for borrowers with fair credit as long as they meet the other requirements around equity, debt, and income. NerdWallet notes that a lower credit score usually means a higher interest rate, so you can often still qualify, but the loan may cost more. The takeaway: a below-average score doesn’t automatically mean “no.” It means the other parts of your application need to be strong.

The Three Numbers That Matter Most

When your credit is weak, lenders lean harder on three things. Get these in good shape, and you improve your odds a lot.

Your equity. This is your biggest strength. Lenders usually want you to keep a good chunk of your home’s value untouched as a cushion. The more equity you have beyond that, the better.
Your debt-to-income ratio. This compares your monthly debt payments to your monthly income. A lower number tells lenders you have room in your budget for a new payment.
Your payment history. Lenders love to see that you’ve paid your existing mortgage on time, especially over the past year. A clean recent record can outweigh older credit mistakes.

If your credit score is low, making these three numbers as strong as possible is the single best way to get approved.

For a full breakdown of what lenders look for — and the specific programs available — see our main guide, bad credit home equity loans and HELOCs.

The “Band-Aid Loan”: Using Equity to Escape High-Interest Debt

Here’s one of the most common reasons people with below-average credit seek a home equity loan: to escape expensive debt.

Credit card interest can be crushing. When someone is trapped making minimum payments on high-rate cards, the balance barely shrinks. A home equity loan — because it’s backed by your home — usually costs far less to borrow than a credit card. Swapping expensive card debt for a lower-cost home equity loan can shrink your monthly payments and help you finally make progress.

There’s even a bonus: paying off maxed-out credit cards can actually raise your credit score over time, because it lowers how much of your available credit you’re using. So a home equity loan can be a “band-aid” that stops the bleeding and helps you heal. LendingTree points out that consolidating high-interest debt is one of the situations where a home equity loan can genuinely make sense for a borrower with weaker credit, according to the LendingTree. But — and this is important — a band-aid only works if the wound stops getting worse.

The Honest Warning You Need to Hear

Using your home to pay off credit cards comes with a real risk, and it would be wrong not to say it plainly: credit card debt can’t take your house, but home debt can.

When you move debt onto your home, you’re turning unsecured debt into secured debt. If you can’t make the payments, you could face foreclosure. So this move is only smart if two things are true:

You can comfortably afford the new payment, every month.
You stop running the cards back up. The most common way this plan fails is when someone pays off their cards, feels relieved, then charges them up again — ending with the home loan and new card debt. Close or freeze the cards you pay off.

Consolidation works when it’s the end of the debt cycle, not a pause button.

Simple Steps to Improve Your Odds

If your credit is below average, a few steps can help:

Check your credit reports for errors. You can get them free, and fixing mistakes can lift your score.
Pay down credit card balances before you apply, which helps both your score and your debt-to-income ratio.
Make every payment on time, especially your mortgage, for several months before applying.
Consider a co-borrower with stronger credit, if that fits your situation.
Shop more than one lender, since approval standards vary widely.

Even small improvements can move you into a better position. If your credit is very low or your income is hard to document, you may also want to explore non-QM loan options, which use flexible ways to qualify. And if you’d like to understand the consolidation math more deeply, see HELOC for debt consolidation..

A below-average credit score doesn’t shut the door on a 2nd mortgage, as your equity, your income, and your payment history can open it. Used carefully, a home equity loan can even help you escape high-interest debt and rebuild your credit over time. But because your home is on the line, this is a move to make only when you can afford the payment and you’re ready to break the debt cycle for good. Learn your options, compare lenders, and borrow with a clear plan.

References

Consumer Financial Protection Bureau. (2024). What you should know about home equity lines of credit.
RefiGuide (2026, May 1). Can you get a HELOC with bad credit?
NerdWallet. (2026). Home equity loans and credit. https://www.nerdwallet.com/article/mortgages/home-equity-loan-bad-credit

Updated : HEM Editorial Team | July 2026 | Fact-Checked ✓