HELOC credit score requirements

Please note: Discover® Home Loans offers a home equity loan product, but does not offer HELOCs.

If you are considering applying for a home equity line of credit (HELOC)—a revolving credit account that lets you borrow money against the value of your home—meeting the minimum credit score for HELOC approval is one of the most important factors to drive success. Having the right credit score can help you qualify for a HELOC with a lower interest rate and possibly more favorable terms on your line of credit.

Assessing your qualifications for a HELOC can help you understand your eligibility for similar home equity loans—allowing you to select the home equity product that best suits your needs.

To stay one step ahead of the game, make sure you understand the credit score requirements for a HELOC before you apply.

Understanding why your credit score matters for a HELOC

Your credit score is not the only part of your financial life that matters when getting approved for a HELOC, but it's one of the key requirements. Having a good credit score shows lenders that you are a responsible borrower who is likely to make payments on time and to pay off your debt.

Different lenders will have different requirements for what credit score is needed for a HELOC. But in general, a credit score of 700 or higher is preferred. Typically, the higher your credit score is, the more likely you are to qualify for the best available interest rates and loan options. This is because a higher credit score helps reassure lenders that you have a history of making payments responsibly and on time.

How to get a HELOC with a lower credit score

What if you have less than the minimum credit score for HELOC approval?

Even if you have a credit score below 700, you may still be able to get approved for a HELOC. Other factors that a lender may consider in addition to your credit score include: 

• Amount of home equity. Because a home equity line of credit is a loan that is secured by your home as collateral, the more home equity you have available means that a lender has a higher chance of recovering funds in the case of failure to repay the loan.
• Debt-to-income (DTI) ratio. This is the ratio of your existing debt payments plus the projected payment for your new loan compared to your total pre-tax income.
• Loan-to-value (LTV) ratio. LTV measures how much money you’re borrowing as a ratio of your home’s value. Lenders will have a maximum percentage of your home value that they will allow you to borrow against.

You combined loan-to-value (CLTV) ratio is calculated by looking at your existing home mortgage balance (how much you already owe on your home), plus the amount of money you are seeking to borrow with a HELOC, divided by your home value:

CLTV = (HELOC amount that you want to borrow + Existing Mortgage Balance) / Assessed Value of Home

Depending the lender you choose, you may be able to borrow up to 90% of the home’s CLTV. For example, if your home is worth $200,000 and you still owe $120,000 on your mortgage, you may potentially qualify for a home equity loan of less than $60,000 (depending on your credit score). 

If you have a lower credit score than the requirements suggest, you may still qualify for a HELOC if you have enough equity in your home, and if your overall debt levels are low enough as a percentage of your income.

However, you might need to be prepared to pay a higher interest rate or accept a lower borrowing limit than you could qualify for with a higher credit score. Lenders may charge a higher interest rate or offer a lower loan amount to minimize the risk of nonpayment on the loan.

If you are concerned about your credit score, you might consider applying for a lower HELOC amount so that your CLTV ratio is well below 90%, to improve the chances of being approved.

Tips to maximize your HELOC credit score

Building credit and contributing to your credit score doesn't happen overnight, but with a few adjustments to your personal finances, you can make steady progress and hopefully qualify for a lower interest rate or better terms on your next loan or line of credit.

Here are some highlights on ways to maximize your credit score:

Make sure your credit reports are accurate

Whether or not you're applying for a home loan, it’s a good idea to review your credit report each year. You can get a free credit report from each of the three major consumer credit reporting companies on the official government-approved site AnnualCreditReport.com.

Check your credit report for errors, such as accounts fraudulently opened in your name, or payments that were incorrectly reported as late. If there are errors, you can contact the credit reporting company and ask to have the records removed.

Avoid late payments

Payment history makes up a big part of your credit score, so it's important to pay your bills on time. Even if money is tight and you cannot afford to pay more than the minimum on a credit card, make sure to pay the minimum amount on time.

Build your credit age

Length of credit history or “credit age" is another key factor in your credit score. If you have had a few credit accounts open for several years, don't cancel them or allow them to lapse; keep those accounts active so you have a longer track record in your credit history.

Pay down your debts

Your credit utilization ratio—the money you owe as a percentage of your available credit limits—is another factor in your credit score. As a general goal, try to have a credit utilization level of less than 30%. This means that if you have a credit card with a borrowing limit of $10,000, you should try to keep your balance under $3,000.

Closing thoughts: Credit score for a HELOC

Even though lenders will typically look for higher credit scores on applications to offer borrowers the best available interest rates and loan terms, having a lower score does not automatically disqualify you from taking out a HELOC.