HELOC for Bad Credit: Can You Still Get Approved in 2025?
Bad credit doesn’t have to stop you—learn how to qualify for a HELOC in 2025 and take control of your financial future.

If you have bad credit, you might assume that securing a Home Equity Line of Credit (HELOC) is out of reach. However, the reality is that it’s still possible to get approved for a HELOC with bad credit in 2025. While it may be more challenging, understanding your options, preparing your finances, and knowing where to apply can make a significant difference in your chances of approval.

In this article, we will explore how a HELOC works, what impact bad credit has on the approval process, and the steps you can take to increase your chances of approval—even with less-than-perfect credit.

What Is a HELOC and How Does It Work?

Before diving into whether you can get a HELOC with bad credit, it’s important to understand what a HELOC is and how it functions.

A Home Equity Line of Credit (HELOC) is a revolving line of credit that allows homeowners to borrow money against the equity in their property. The equity is the difference between your home’s current market value and the remaining balance on your mortgage.

A HELOC works similarly to a credit card: you are approved for a certain limit, and you can borrow, repay, and borrow again during the “draw period,” typically lasting 10 years. After this, you enter the repayment period, where you pay back both the principal and interest.

The amount you can borrow through a HELOC is typically based on your home’s equity, creditworthiness, and other financial factors. The appeal of a HELOC lies in its flexibility—borrowers only pay interest on the amount they use, and the interest rates tend to be lower than other forms of unsecured credit.

How Does Bad Credit Affect Your HELOC Approval?

Bad credit, typically defined as a credit score below 650, can certainly affect your ability to qualify for a HELOC. Lenders use your credit score to gauge the level of risk they’re taking by lending to you. A lower credit score suggests that you’ve had difficulty managing debt in the past, which makes you a riskier borrower.

However, your credit score isn’t the only factor that lenders consider when evaluating your HELOC application. Lenders will also look at:

• Your home equity: The more equity you have, the more likely you are to be approved, even with a lower credit score.
  
• Your income and debt-to-income (DTI) ratio: Lenders want to ensure that you have the ability to repay the loan.
  
• Your payment history: If you’ve had a history of late payments but your credit score is now improving, lenders might consider this favorably.
  

In short, while bad credit can make the approval process more difficult, it’s not an automatic disqualification. If your home has significant equity, and you have a reliable income and reasonable debt levels, you still have a chance of getting approved for a HELOC.

Can You Get a HELOC with Bad Credit in 2025?

The short answer is yes—getting a HELOC with bad credit is possible in 2025. Lenders are still offering home equity lines of credit to borrowers with low credit scores, but the terms might not be as favorable as they would be for someone with good credit.

Here are a few things you can expect if you apply for a HELOC with bad credit:

1. Higher Interest Rates

One of the biggest impacts of bad credit is that you may be offered higher interest rates. Lenders charge higher rates to riskier borrowers to protect themselves from potential losses.

While the interest rates on a HELOC are still generally lower than those of unsecured credit lines, such as credit cards or personal loans, you can expect your rates to be on the higher end of the spectrum if your credit score is low.

2. Lower Credit Limits

Another downside of applying for a HELOC with bad credit is that you might be approved for a lower credit limit. Lenders may be more cautious about extending a larger line of credit if you have a history of poor credit management.

Your credit limit will likely depend on the amount of equity you have in your home, so if you have significant equity, you may still be able to get access to a reasonable line of credit, even with a lower credit score.

3. Tighter Requirements

Some lenders may require a larger down payment or impose stricter qualifications for applicants with bad credit. For example, they may require a lower loan-to-value (LTV) ratio, meaning you will need to have more equity in your home to qualify.

You may also be asked to provide more documentation about your income and assets to prove that you can afford to repay the loan.

4. Secured Loan Risk

A HELOC is a secured loan, meaning your home is collateral for the line of credit. If you default on the loan, the lender has the right to foreclose on your property. This makes it a risky option for borrowers with bad credit, and lenders will take this risk into account when deciding whether to approve your application.

Steps to Increase Your Chances of HELOC Approval with Bad Credit

While securing a HELOC with bad credit is possible, there are steps you can take to improve your chances of approval. By taking a proactive approach and addressing potential issues with your finances, you can boost your eligibility for a HELOC.

1. Increase Your Home Equity

One of the most significant factors that influence your ability to get a HELOC is the equity in your home. The more equity you have, the more likely you are to be approved.

If your credit is bad, but your home equity is substantial, lenders may be willing to overlook your low credit score. If you don’t have enough equity, consider ways to increase it, such as paying down your mortgage or making home improvements that can raise your property’s value.

2. Work on Improving Your Credit Score

While it may take time, improving your credit score can significantly improve your chances of securing a HELOC. Start by checking your credit report for any errors or inaccuracies and dispute any discrepancies with the credit bureaus.

Additionally, focus on paying down high-interest debt, making payments on time, and reducing your credit card balances to improve your credit utilization ratio. As your credit score improves, you may find it easier to get approved for a HELOC with better terms.

3. Consider a Co-Signer or Joint Application

If you have a low credit score, you might consider applying for a HELOC with a co-signer or co-borrower who has better credit. By adding someone with strong credit to your application, you can improve your chances of approval.

Keep in mind that if you default on the loan, your co-signer will be responsible for repaying the debt. This is a risk for both parties, so it’s important to communicate openly about your plans and repayment abilities.

4. Shop Around for the Best Lender

Not all lenders have the same qualifications for approving a HELOC, so it’s important to shop around for the best option. Some lenders specialize in offering HELOCs to individuals with bad credit, while others may have more stringent requirements.

Compare rates, terms, and fees from different lenders to find the best deal for your situation. Some credit unions and online lenders may be more willing to work with borrowers with bad credit compared to traditional banks.

Mistakes to Avoid When Applying for a HELOC with Bad Credit

If you’re considering applying for a HELOC with bad credit, it’s important to avoid common mistakes that could hurt your chances of approval or lead to financial strain down the road.

1. Borrowing More Than You Can Afford

It can be tempting to borrow a large amount of money, especially if you’re approved for a higher credit limit. However, borrowing more than you can afford to repay is a dangerous mistake that can lead to long-term financial difficulties.

Make sure to carefully assess your budget and only borrow what you absolutely need. Consider how much you can afford in monthly payments and whether you will be able to repay the loan if interest rates rise.

2. Using a HELOC for Non-Essential Purchases

A HELOC is a valuable tool for emergency expenses, home improvements, or consolidating high-interest debt. However, using a HELOC for non-essential purchases, such as vacations or luxury items, can quickly lead to financial trouble.

Remember, your home is collateral for the loan. If you fail to repay, you risk losing your property. Use your HELOC responsibly to avoid putting your home at risk.

3. Ignoring the Impact of Rising Interest Rates

Since most HELOCs have variable interest rates, it’s important to consider the impact of rising rates on your monthly payments. If interest rates rise, your payments could increase significantly. Make sure you understand how rate changes will affect your repayment plan before committing to a HELOC.

Got Bad Credit? You Can Still Get a HELOC—Here’s How!

Bad credit isn’t a deal-breaker—it’s a challenge you can overcome.

Boost your equity. Strengthen your credit. Find lenders who understand your journey.

Approval takes effort—but it’s within reach.

Don’t settle. Don’t assume you’ll be denied.

Instead, prepare like a pro and apply with confidence.

Even with bad credit, the right HELOC can get you back on track.

Ready to take control?

Your equity could be your fresh start.