topic Re: HELOC Chances with poor credit in Mortgage Loans

HELOC Chances with poor credit

Prakas — Mon, 28 Apr 2025 02:09:09 GMT

So for a quick overview. My house is worth 220-260k, and i owe about 80k. However, my credit situation isn't good. My fico is in the 550-580 range. I was at about ~500 in October. I had about 8 credit cards in default 180+ days. I've settled on about half, getting my total amount owed from ~30k to ~10k. I'm going in the right direction, but would like a 20k heloc loan to pay off my 17k car at 30% interest and settle another card or two. My score isn't even close to consider an actual refinance on my auto loan, so I'm hoping to do a heloc.

I only have 2 active cards i just paid off. total limit is 700, i owed about 500, so i'm hoping it'll bump me to 600+ credit score next month. This car loan is killing me at 30% interest, the balance isn't budging. I'm litterally looking at almost a year of payments completely to interest, it's awful. Do I have a shot at a heloc?

Re: HELOC Chances with poor credit

ShanetheMortgageMan — Mon, 28 Apr 2025 16:24:40 GMT

Congrats on your score improvement, but HELOC's generally are looking for strong credit. Some will go to lower scores, but the lowest credit score I've seen accepted is a 640. The reason that they want stronger credit is because typically HELOC's are a 2nd position mortgage, rather than 1st position, so in the event of a foreclosure they do not have the priority position of being paid off.

I'm not a big fan of swapping unsecured debt (car loan) for secured debt (HELOC), because if there are issues paying the HELOC then your home could get foreclosed on but if you have trouble paying the car loan then your home won't be impacted. But for the person with right spending habits it's not as big of a big risk.

Re: HELOC Chances with poor credit

Prakas — Tue, 29 Apr 2025 02:59:02 GMT

Thank you. That's what I was afraid of. I see people here getting denied, even at 647 fico for a heloc on here. My affordability isn't so much an issue. It's that I'm getting to the point where I'm trying to improve my situation. Sounds like I need to keep pushing my score higher before i try.

Re: HELOC Chances with poor credit

ShanetheMortgageMan — Thu, 01 May 2025 04:12:36 GMT

A 30% interest rate on the car loan is killer, any chance to refinance that or could you sell it/trade it in to get a new car loan at a lower interest rate?

Re: HELOC Chances with poor credit

eaglebay77 — Wed, 18 Jun 2025 19:14:23 GMT

@ShanetheMortgageMan wrote:
Congrats on your score improvement, but HELOC's generally are looking for strong credit. Some will go to lower scores, but the lowest credit score I've seen accepted is a 640. The reason that they want stronger credit is because typically HELOC's are a 2nd position mortgage, rather than 1st position, so in the event of a foreclosure they do not have the priority position of being paid off.

I'm not a big fan of swapping unsecured debt (car loan) for secured debt (HELOC), because if there are issues paying the HELOC then your home could get foreclosed on but if you have trouble paying the car loan then your home won't be impacted. But for the person with right spending habits it's not as big of a big risk.

@ShanetheMortgageMan
I was able to get approved for $142k through a local credit union with a 628 FICO 8 credit score. Net self employment income at $150k, they have me paying off ~$40k in debt. Granted, I had some medical stuff that resulted in damaged credit, but credit unions are way more willing to make all sorts of exceptions. Closing on it today.

Re: HELOC Chances with poor credit

ShanetheMortgageMan — Wed, 18 Jun 2025 19:43:18 GMT

@eaglebay77 wrote:
@ShanetheMortgageMan wrote:
Congrats on your score improvement, but HELOC's generally are looking for strong credit. Some will go to lower scores, but the lowest credit score I've seen accepted is a 640. The reason that they want stronger credit is because typically HELOC's are a 2nd position mortgage, rather than 1st position, so in the event of a foreclosure they do not have the priority position of being paid off.

I'm not a big fan of swapping unsecured debt (car loan) for secured debt (HELOC), because if there are issues paying the HELOC then your home could get foreclosed on but if you have trouble paying the car loan then your home won't be impacted. But for the person with right spending habits it's not as big of a big risk.
@ShanetheMortgageMan
I was able to get approved for $142k through a local credit union with a 628 FICO 8 credit score. Net self employment income at $150k, they have me paying off ~$40k in debt. Granted, I had some medical stuff that resulted in damaged credit, but credit unions are way more willing to make all sorts of exceptions. Closing on it today.

Nicely done!