What Credit Score Do You Need for a Home Equity Loan?

What Credit Score Do You Need for a Home Equity Loan?

Here is the short answer: a home equity loan usually needs a credit score of about 620 to start. Standard approval lands higher, at 660 to 680, and the best rates open up at 700 to 720 and above, with 740 and up getting the most competitive terms.

A home equity loan is a lump-sum second mortgage. You borrow a fixed amount once, at a fixed rate, and repay it on a set schedule. That is different from a home equity line of credit, which is a revolving line you draw from as you go.

Because it sits behind your first mortgage, a home equity loan asks for both a solid score and real equity in the home.

Home Equity Loan Credit Score Tiers

Here is how the score bands translate into what you can expect.

FICO Range	Tier	What to expect
740+	Top	The most competitive rates and terms.
700 to 720+	Strong	Meaningfully lower rates open up here.
660 to 680	Standard approval	The typical band where approvals land.
About 620	Minimum	Possible, at higher rates and with closer scrutiny.

Beyond the score, expect to keep about 20 percent equity. Lenders generally cap the combined loan-to-value ratio around 80 to 85 percent, and some go up to 90 percent, with a debt-to-income ratio of 43 percent or below.

What Lenders Really Score

Your credit score is not one mysterious number. It is built from five factors, and the two biggest are the two you can move fastest. Payment history at 35 percent and amounts owed at 30 percent together make up about two thirds of a FICO score, and amounts owed is mostly your credit card utilization, which you can lower in a single billing cycle.

One thing worth knowing: a mortgage lender pulls all three of your bureau scores and uses the middle one, not the highest and not an average. So the number that matters is your second best. Cleaning up payment history and card balances lifts all three at once.

Beyond the Score

Even a strong score does not close a home equity loan by itself. Lenders also weigh:

1. Home equity. How much of the home you own outright. About 20 percent is the usual starting point.
2. Combined loan-to-value ratio. Your first mortgage plus the new loan, divided by the home’s value. Lenders cap this around 80 to 85 percent, some to 90.
3. Debt-to-income ratio. Your monthly debts against your monthly income, generally wanted at 43 percent or below.
4. Cash reserves. Months of payments you could cover if income stopped. Reserves reassure the lender.
5. Income and proof of it. Pay stubs, tax returns, or bank statements showing you can carry a second payment.

Equity works like a down payment here. The more you have, the more you can borrow and the better your rate, even if your score is not perfect.

Download Credit Booster AI on iOS and Android before you apply. It reads all three of your credit reports, flags the errors that drag your score down, and shows which paydown lifts your score the most, so you borrow in the best tier you can reach.

How to Improve Your Score Before You Apply

You do not need a perfect score. You need to cross into the next tier, because the rate curve moves in steps.

1. Lower your card utilization. Getting balances under 30 percent of their limits, and ideally under 10 percent, is the quickest win. Amounts owed is about 30 percent of your score.
2. Fix report errors. One in five reports carries a mistake. Removing a wrong late payment or a paid collection can move your score fast.
3. Keep paying on time. Payment history is 35 percent of the score, so a clean recent stretch matters.
4. Start early. A realistic 90-day improvement is 30 to 60 points, often enough to jump a tier. Because tapping equity is rarely urgent, begin your prep 6 to 12 months out and let on-time payments and lower balances compound.

The Bottom Line

A home equity loan is available across a wide credit range. The floor is about 620, standard approval sits at 660 to 680, and 740 and up earns the most competitive terms. What your score really controls is the rate, and on a second mortgage that adds up over the life of the loan.

Before you apply, spend a few months pulling down card balances and clearing errors. A 30 to 60 point move can drop your rate a full tier. Download Credit Booster AI on iOS and Android to see your reports, catch what is holding your score back, and fix it before you borrow.

Related reading: Compare what it takes for a second mortgage, a construction loan, and a first-time home buyer. Start with what credit score you need for a mortgage.

Sources

• Rate.com, HELOC and Home Equity Loan Requirements: rate.com
• The Mortgage Reports, Home Equity Loan DTI and Credit Requirements: themortgagereports.com
• LendingTree, Home Equity Loan Requirements: lendingtree.com
• FICO, What Makes Up Your Credit Score (myFICO): myfico.com

Frequently Asked Questions

What credit score do you need for a home equity loan?

The minimum is about 620, but standard approval lands at 660 to 680. Scores of 700 to 720 and up unlock meaningfully lower rates, and 740 and above gets the most competitive terms. You also need roughly 20 percent equity and a debt-to-income ratio of 43 percent or below.

What is the difference between a home equity loan and a HELOC?

A home equity loan is a lump-sum second mortgage: you borrow a fixed amount once and repay it on a set schedule, usually at a fixed rate. A HELOC is a revolving line of credit you draw from as needed, more like a credit card secured by your home. The credit requirements are similar, but the structure and payments differ.

How much equity do I need for a home equity loan?

Plan on about 20 percent equity. Lenders generally cap the combined loan-to-value ratio (your first mortgage plus the new loan, divided by the home’s value) around 80 to 85 percent, and some go up to 90 percent. The more equity you have, the more you can borrow and the better your rate.

Can I get a home equity loan with a 620 credit score?

Often yes. About 620 is the typical minimum, so approval is possible, but expect a higher rate and closer scrutiny of your equity and debt-to-income ratio. Moving up into the 660 to 680 band, where standard approvals sit, improves both your odds and your pricing.

What credit score gets the best home equity loan rate?

Scores of 740 and above get the most competitive terms. Meaningfully lower rates start opening up around 700 to 720. Because rates move in steps, pushing from the mid-600s into the 700s usually matters more for your payment than going from 760 to 800.