Can You Get a HELOC With Bad Credit?

Most HELOCs and home equity loans require a credit score of at least 640, so if your score is below that, a HELOC usually is not available no matter how much equity you have. But there is a real path to your equity with lower credit: an FHA cash-out refinance can go as low as a 580 score, which means a weaker credit profile does not have to lock you out of the cash in your home.

The key is knowing which tool fits your credit. Above 640, a HELOC or home equity loan is on the table. Below 640, the smarter move is usually a cash-out refinance, and the FHA version in particular is built for exactly this situation. Here is how it actually works.

Credit and LTV figures reflect FHA and common lender guidelines as of July 2026. Lender minimums vary. Verified July 2026.

What credit score do you need for a HELOC?

Most lenders require at least a 640 credit score for a HELOC or home equity loan, and many want higher for their best terms. Home equity lines are second liens, which makes them riskier for the lender, so the credit bar sits higher than a lot of borrowers expect.

If your score is 640 or above, you have real options, and how much you can borrow then depends on your equity, your income, and the lender's combined loan-to-value limits. If your score is below 640, though, chasing a HELOC is usually the wrong strategy, because you will mostly hit declines. That does not mean your equity is out of reach. It means you need a different door.

How can I tap my equity with a credit score below 640?

The answer for most lower-credit borrowers is a cash-out refinance, not a HELOC. A cash-out refinance replaces your existing mortgage with a larger one and gives you the difference in cash, and its credit requirements can be far more forgiving than a HELOC's.

The standout option is an FHA cash-out refinance, which allows credit scores as low as 580 under FHA guidelines. That is a meaningful gap below the 640 a HELOC demands, and it is why, when someone comes to me frustrated that they cannot get a home equity line, the FHA cash-out is often the answer that actually works. Instead of a second loan sitting behind your first, you get one new FHA-backed mortgage that cashes out your equity, with credit flexibility a HELOC simply does not offer.

How does an FHA cash-out refinance work with bad credit?

An FHA cash-out refinance lets you replace your current loan, whatever type it is, with a new FHA loan for more than you owe, and take the difference in cash. You can borrow up to 80% of your home's appraised value, so you keep at least 20% equity after the cash-out.

Here is a simple example. On a home appraised at $400,000, 80% is $320,000. If you owe $250,000, you could refinance into a $320,000 FHA loan and walk away with about $70,000 in cash before closing costs. The credit minimum is 580 under FHA rules, the debt-to-income ratio generally needs to stay around 43%, though it can reach 50% with strong compensating factors, and the home must be your primary residence. You also need a clean recent mortgage payment history, since a single 30-day late in the past year can sink the approval.

One honest note: many lenders set their own minimums above the FHA floor, commonly 600 to 620 for cash-out. This is exactly where a broker matters. I have access to lenders who will work at 580 when others insist on 620, which can be the difference between getting your cash and getting turned away. I am Emmett Clark, a mortgage broker licensed in 18 states with access to 240-plus wholesale lenders.

Is a cash-out refinance better than a HELOC?

Neither is universally better; they solve different problems, and your credit often decides which one is even available. A HELOC gives you a flexible line you draw from as needed and works well when you have strong credit and want to borrow in pieces over time.

A cash-out refinance gives you a single lump sum and replaces your whole mortgage, which makes sense when you need a larger amount at once, when you can also improve your rate, or, crucially, when your credit is below HELOC territory. For a borrower with a 600 score sitting on substantial equity, the comparison is not really HELOC versus cash-out, because the HELOC is off the table. The real choice is cash-out refinance or nothing, and the FHA cash-out is what puts the cash within reach.

What if my credit is even lower than 580?

Below 580, even FHA cash-out becomes difficult, though FHA guidelines technically reach down to 500 and a small number of lenders will consider it with compensating factors. At that level, the more productive move is often a short, focused effort to raise your score before applying.

Sometimes lifting a score from the 550s into the low 600s takes only a few months of paying down balances and clearing up reporting errors, and it opens far better options. As part of helping someone tap their equity, I will often map out exactly what it would take to get their score to the next threshold, because a little patience can meaningfully lower the cost of the loan. If your equity need is urgent, talk through what is possible now. If it can wait, a small credit improvement can pay off. For more ways to use your equity, see our home equity guide.