Home Equity With Bad Credit: Every Option Available to You in 2026

You own your home. You've built up equity. But your credit score isn't where you need it to be for a traditional home equity loan or HELOC. The good news: a low credit score doesn't automatically lock you out of your equity. There are more options than most homeowners realize — and some of the best ones don't care about your credit score at all.

Why Credit Scores Matter (And When They Don't)

Traditional home equity products — HELOCs, home equity loans, and cash-out refinances — are debt products. When you borrow money, the lender's primary concern is whether you'll repay it. Your credit score is their shorthand for that risk. A low score signals higher default risk, which means lenders either decline your application or charge you significantly higher interest rates.

But not all home equity products are debt products. Home equity investments (HEIs) — offered by companies like Hometap, Unlock, and Point — aren't loans at all. They give you cash in exchange for a share of your home's future value. Since there are no monthly payments and no interest charges, the repayment risk calculation is completely different. The asset (your home) is the collateral, not your income or credit history.

This is the fundamental reason why HEIs have much lower credit score requirements than traditional options, and why many homeowners with poor credit find them to be the most accessible path to their equity.

What Counts as "Bad Credit" for Home Equity?

Credit scores generally break down as follows:

For the purposes of this guide, we define "bad credit" as a credit score below 640 — the rough threshold where traditional home equity lending becomes difficult or prohibitively expensive. If you're below 640, read on. Every option in this guide applies to you.

Option 1: Home Equity Investment (HEI) — Best for Most Homeowners

A home equity investment is the most accessible option for homeowners with bad credit. Here's how it works: a company pays you a lump sum of cash today in exchange for a percentage of your home's future appraised value. When you eventually sell, refinance, or reach the end of the term, they receive their share. No monthly payments. No interest. No income verification.

Because HEIs are not loans, the credit score requirements are dramatically lower:

• Hometap: 550 minimum — start your application here
• Unlock: 500 minimum
• Point: 500 minimum
• Unison: Around 620+

These are among the lowest thresholds of any home equity product on the market. Even homeowners who have been turned down for personal loans, auto loans, or credit cards may qualify for an HEI.

What You Need Beyond the Credit Score

HEI providers care more about your home than your credit history. To qualify, you generally need:

• Sufficient equity: Most providers require at least 25–30% equity remaining after the investment
• Minimum home value: Usually $200,000 or more
• Owner-occupied: Must be your primary residence
• Clean title: No major title issues or recent foreclosure proceedings
• No excessive liens: Significant outstanding liens (second mortgages, tax liens) can affect eligibility

Notice what's not on that list: income verification, debt-to-income ratio, employment history. These are the exact factors that trip up bad-credit applicants on traditional products.

The Real Cost of an HEI

HEIs aren't free money. The cost is measured in equity shared, not interest paid. In exchange for $50,000 today, you might give up 15–25% of your home's future value. If your home appreciates significantly, that can become expensive in hindsight. But for homeowners who need cash now and can't qualify for traditional products at reasonable rates, an HEI can be the most practical option available.

For a deeper look at how HEIs work and compare to traditional debt products, read our guide on home equity agreements vs HELOCs.

Option 2: FHA Cash-Out Refinance

If you want a traditional loan product but have poor credit, an FHA cash-out refinance is the most forgiving option. The Federal Housing Administration insures these loans, allowing lenders to extend financing to borrowers they'd otherwise decline.

FHA cash-out refinance requirements (as of 2026):

• Minimum credit score: 500 (with 80% LTV or less); 580 (to access up to 80% LTV)
• Maximum loan-to-value: 80% of appraised home value
• Income verification: Required — you'll need to document income and pass a debt-to-income review
• Occupancy: Must be your primary residence
• Existing FHA loan: Not required — you can refinance a conventional mortgage into an FHA loan

The catch: FHA loans require you to pay mortgage insurance premiums (MIP) for the life of the loan if your down payment (or equity position) is below 10%. This adds a recurring cost to your monthly payment that doesn't go away as your credit improves. On a $200,000 loan balance, MIP adds approximately $134–$268/month depending on your term.

Also important: an FHA cash-out refinance replaces your entire mortgage. If you currently have a low-rate mortgage from 2020–2022, refinancing now means taking on today's higher rates for the full balance — not just the cash-out portion. Run the math carefully before proceeding.

Option 3: Home Equity Loan With a Co-Signer

If your credit is the only obstacle (your income and home equity are solid), a co-signer or co-borrower can sometimes bridge the gap. A co-signer with a good credit score takes joint responsibility for the debt, reducing the lender's risk and potentially getting you approved where you wouldn't be on your own.

This works best when:

• A family member or trusted partner has strong credit (680+) and is willing to co-sign
• Your income is sufficient to make the payments — lenders will verify your ability to pay regardless of the co-signer
• The co-signer understands the risk — they're on the hook for the debt if you miss payments

The downside is obvious: you're involving another person in your financial obligations. This can strain relationships if payments become difficult. The co-signer's credit will be impacted by any late payments or default. Proceed thoughtfully.

Option 4: Hard Money Loan

Hard money lenders are private individuals or small firms that lend money based almost entirely on collateral value — in this case, your home. They care very little about your credit score. What they care about is whether your home has enough value to cover the loan if they need to foreclose.

Hard money loan characteristics:

• Credit score: Often no minimum — asset-based lending
• Interest rate: Very high — typically 10–18% or more
• Loan term: Short — usually 6 months to 3 years
• LTV: Conservative — most lend up to 60–70% of home value
• Fees: High origination points (2–5% of loan amount)
• Purpose: Typically used by real estate investors; increasingly available to homeowners

Hard money loans are a last resort for most primary homeowners. The cost is high, the terms are short, and defaulting means losing your home. They're most appropriate for homeowners who need a bridge loan (e.g., buying a new home before selling the current one) or who have a clear, short-term plan to pay the loan off quickly. If you're considering hard money, make absolutely sure you have a credible exit strategy before proceeding.

Option 5: Reverse Mortgage (For Homeowners 62+)

If you're 62 or older, a reverse mortgage (HECM) is a unique option that doesn't require monthly payments and has relatively flexible credit requirements. Instead of making monthly payments to a lender, the lender makes payments to you (or gives you a lump sum or line of credit) backed by your home equity. The loan comes due when you sell the home, move out, or pass away.

HECMs are insured by the FHA and require a credit assessment — but the threshold is meaningfully lower than a traditional cash-out refinance. Lenders look primarily at your ability to maintain the home, pay property taxes, and keep homeowner's insurance current.

Reverse mortgages work best for homeowners who:

• Are 62+ and plan to remain in the home long-term
• Need supplemental income or a cash reserve in retirement
• Don't plan to leave the home's equity to heirs (or have made other inheritance arrangements)

If you're under 62, a reverse mortgage isn't an option — HEIs are typically the better alternative in your case.

Option 6: HELOC or Home Equity Loan With a Credit Union

Credit unions are member-owned financial institutions that frequently offer more flexible underwriting than large banks. If you've been turned down by a national bank for a HELOC or home equity loan, a local credit union may work with you at a lower credit score threshold — sometimes as low as 620 — especially if you're an existing member.

Things to know about credit union HELOCs:

• You must be a member (some are open to anyone in a geographic area; others are employer- or industry-based)
• Credit score minimums vary but are often 10–20 points lower than major banks
• Rates may be slightly higher than big banks for lower-credit borrowers, but lower than the alternatives
• Local knowledge of your real estate market can work in your favor

If you're at 620–650 and have been rejected by big lenders, a credit union is worth a direct conversation before jumping to an HEI or hard money loan.

Improving Your Credit Before Applying

If you're close to a meaningful threshold (say, 580 trying to hit 620, or 620 trying to hit 640), a few targeted credit improvement moves can open significantly better options:

1. Pay down revolving balances: Credit utilization (how much of your available credit you're using) is one of the fastest-moving factors in your score. Getting below 30% utilization across all cards can add 20–50+ points
2. Dispute errors on your credit report: Pull your report from all three bureaus. Errors are more common than you'd think — disputing them can result in score improvements within 30–60 days
3. Become an authorized user: If a family member has a credit card with long history and low utilization, being added as an authorized user can meaningfully boost your score
4. Don't apply for new credit: Every hard inquiry drops your score slightly. Pause new applications while you're working on improving your score for a home equity product
5. Keep accounts open: Closing old credit card accounts reduces your average account age and available credit — both of which can hurt your score

Even a 30-day focused effort can sometimes produce enough improvement to unlock meaningfully better options. But if you need cash now and can't wait, the options above — particularly HEIs — don't require you to wait.

Which Option Is Right for You?

The Bottom Line

A low credit score limits your options — but it doesn't eliminate them. Home equity investments are the standout option for most homeowners with bad credit: no monthly payments, no income verification, credit scores accepted as low as 500, and a fast, digital process that doesn't require you to prove to a bank that you deserve the money.

If you have meaningful equity in your home and a score below 640, start with Hometap. Get an estimate (soft credit pull, no impact), understand the equity cost, then compare with Unlock or Point if you want competitive offers. You may be surprised how accessible your equity actually is.

For a deeper comparison of HEI providers, see our ranking of the best home equity sharing companies and our Hometap vs Unlock comparison. If you're specifically evaluating Hometap, our detailed Hometap review and is Hometap worth it analysis will help you decide.