How to Get a HELOC with Bad Credit (Under 640 Score) in 2026

Yes, You Can Still Tap Your Equity

In the high-interest environment of 2026, banks have become incredibly picky. If your FICO score is under 680, you have likely seen the door slammed in your face by Wells Fargo, Chase, and Bank of America. They want "Grade A" paper, and in their eyes, anything less is a risk they don't want to take.

But the big banks aren't the only game in town. In fact, for borrowers with credit scores in the 580-660 range, there is an entire ecosystem of alternative lenders, credit unions, and government-backed programs designed to help you access your wealth. You might pay a higher rate, but access to capital is better than no access at all.

Why Credit Score Matters for HELOCs

Unlike a primary mortgage which is often sold to Fannie Mae or Freddie Mac, HELOCs are usually held in a bank's own portfolio. This means they make the rules.

• 760+: Prime Rate + 0% Margin (The VIP treatment)
• 700-759: Prime + 1% Margin
• 640-699: Prime + 3% to 5% Margin
• Under 640: Denial from 95% of traditional lenders.

If you are in that sub-640 bucket, you need a different strategy.

Strategy 1: The Credit Union Loophole

Credit Unions are non-profit cooperatives. They exist to serve their members, not shareholders. Because of this, they manually underwrite loans. If you have a 580 credit score because of a medical bill from 3 years ago, but you have perfect payment history since then, a human underwriter at a Credit Union can say "Yes" where a computer algorithm at a big bank said "No."

Action Step: Search for "Community Credit Unions" in your county. Go in person. Explain your situation before they pull your credit.

Strategy 2: The Co-Signer Solution

If your income is good but your credit is bad, a co-signer can save you. A co-signer with strong credit (740+) acts as a guarantor. Lenders will use the higher credit score for pricing the loan in some cases, or at least use the strength of the co-signer to overcome the weakness of your profile.

Warning: This puts your co-signers credit at risk. If you miss a payment, their score tanks too.

Strategy 3: The Cash-Out Refinance Alternative

If you can't get a HELOC, look at an FHA Cash-Out Refinance. FHA loans allow scores as low as 500 (with 10% equity left) or 580 (with 3.5% equity left, though cash-out usually limits you to 80% LTV).

While this isn't a HELOC (you lose your current mortgage rate), it guarantees approval when other doors are closed.

Strategy 4: Lower Your LTV

Risk is a two-way street. If you are a high credit risk, you can lower the bank's collateral risk by borrowing less.

Instead of asking for 90% CLTV (Combined Loan to Value), ask for 60% CLTV. If you have $200k in equity, consider only asking for $50k. The bank is far more likely to approve a loan that is heavily secured by real assets.

Beware of Predatory Lenders

When you are desperate, sharks appear. Avoid any lender that:

• Charges "application fees" upfront.
• Guarantees approval before checking details.
• Push "Hard Money" HELOCs with rates over 15%.

Credit Repair Before Applying

Sometimes the best move is to wait 3 months. Use the "Rapid Rescore" techniques:

1. Pay down utilization: Get credit card balances under 30% of their limit.
2. Dispute errors: Use apps like Credit Karma to find and dispute zombies debts.
3. Become an Authorized User: Ask a family member with perfect credit to add you to their oldest credit card.

Even a 20-point bump can move you from "Denied" to "Approved."