Wondering what credit score you need for a home equity loan? Most lenders look for 620 or higher, while the best rates typically show up around 680–740+. That said, score is only one lever. Strong equity, low debt‑to‑income (DTI), and clean documentation can offset a middling score, while thin equity or high DTI can sink an otherwise good application. Here’s how the decision actually comes together—and what to do if you’re on the bubble.
Typical score bands (and what they mean)
- 740+ (excellent): Access to the most competitive pricing and higher approved amounts, assuming equity and DTI check out.
- 680–739 (good): Generally favorable terms with modest pricing hits.
- 620–679 (fair): Approvals are common, but expect tighter combined loan‑to‑value (CLTV) limits, more documentation, and higher APRs.
- Below 620 (subprime): Possible, but harder. You’ll need strong compensating factors: substantial equity, low DTI, stable income, and smaller loan requests.
Reality check: Lender overlays vary. A 660 score with 50% CLTV and 32% DTI can be safer than a 720 score stretched to the max on both equity and income.
Score isn’t everything: the four big levers
- Equity and CLTV. Lenders cap borrowing by CLTV (existing mortgages + new loan ÷ appraised value). Common caps land around 80%–85% CLTV; with weaker credit, caps may be lower.
- DTI ratio. Under 43% is a good target; lower is better. Paying down revolving balances before applying can meaningfully improve DTI and your score.
- Income stability. W‑2 consistency helps. Self‑employed borrowers should be ready with two years of returns, year‑to‑date P&L, and business bank statements.
- Credit history detail. Recent late payments, charge‑offs, or a fresh bankruptcy matter more than older blemishes. Provide clear letters of explanation and proof of resolution.
Home equity loan vs. HELOC: score expectations
- Fixed‑rate home equity loan (second mortgage): Predictable payments; pricing is sensitive to score and CLTV. Good fit when you know the exact amount you need and want certainty.
- HELOC (variable line of credit): Often similar score expectations, but lenders may scrutinize DTI and payment shock risk more closely. Some HELOCs let you lock portions at a fixed rate, which can help if you qualify but fear rising rates.
How to qualify with a fair or low score
- Lower the CLTV. Borrow less than the maximum. Asking for 60–70% CLTV instead of pushing 80–85% can flip a borderline file into an approval.
- Trim DTI before you apply. Pay down credit cards to under 30% utilization (under 10% is even better). Avoid opening new accounts.
- Show reserves. Savings covering 3–6 months of total housing payments strengthens the case.
- Dispute errors now, not mid‑process. Pull reports, fix inaccuracies, and let scores update before you apply.
- Stabilize income. Don’t change jobs or switch to commission right before underwriting.
- Consider a co‑borrower. A stronger profile can improve pricing and approval odds.
- Package a clean file. Upload complete, legible docs in one shot to avoid back‑and‑forth delays that invite extra scrutiny.
For borrowers comparing options, platforms like Tiger Loans offer a range of solutions tailored to different financial needs and can help you understand how score, CLTV, and DTI interact across loan types.
Rates, fees, and timelines you should expect
- Rates: Risk‑based. Lower scores pay more. Model payments at today’s rate and a stress case (for HELOCs, add a few percentage points).
- Fees: Appraisal/valuation, origination, title, and recording are common. Some HELOCs add annual or inactivity fees; a few include early‑closure fees. Always compare APR, not just the headline rate.
- Timelines: Most close in 2–6 weeks, driven by appraisal availability, title clearance, and how fast you respond to conditions.
Tax note (short and sweet)
Interest may be deductible only when the funds are used to buy, build, or substantially improve the home securing the loan. Debt consolidation or general expenses usually don’t qualify. Speak with a tax professional before counting on deductions.
If you’re declined, consider these paths
- Smaller request or longer term. Reducing the amount or stretching the term can calm DTI.
- HELOC with rate‑lock features. Draw what you need, then fix portions to control payment risk.
- Cash‑out refinance. One new first mortgage; may improve payment structure if the rate and term make sense.
- Personal loan. Faster and unsecured, but smaller amounts and higher rates.
- Home equity investment. No monthly payment; you exchange future appreciation. Complex—read every clause.
- Eligible borrowers: You may qualify for VA Loans that offer favorable terms compared with many conventional products, potentially reducing costs without taking a second lien.
Bottom line
A 620+ credit score is a practical minimum for many lenders, while 680+ opens better pricing and flexibility. But approval isn’t just about the number: right‑size the loan, keep CLTV conservative, drive DTI down, and present a spotless file. If the terms still feel heavy, compare a HELOC with lock options, a cash‑out refi, or a veteran‑friendly path. The right move is the one that still fits when rates rise and life gets messy.
