Home Improvement Loans with Bad Credit

home improvement loan bad credit

Do you need a loan to make renovations or repairs to your house?

There are several types of renovation loans that allow you to get a loan using your equity as collateral.

But, what credit score is needed for a home improvement loan?

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Credit Score Requirements by Loan Type

  • HELOC – 680
  • Home Equity Loan – 680
  • Cash-out refinance – 640
  • 203k Loan – 640
  • USDA Rehab – 660
  • VA Housing Grants – 580

Types of Home Improvement Loans

There are several types of home improvement loans available to homeowners. Home equity loans, home equity lines of credit HELOC, Government rehab loans, and cash-out refinancing.

Home Equity Loans

660+ Credit Score Needed

Home equity loans use the borrowers’ equity as collateral for a new loan, also known as a second mortgage. Homeowners can borrower up to 80% of the market value of the property.

The second loan will have a higher interest rate than a mortgage loan and has a repayment period of 5-10 years. A home equity loan provides the borrower with a lump-sum of cash they can use how they wish.

Home Equity Line of Credit (HELOC)

680+ Credit Score Needed

A home equity line of credit is similar to a home equity loan but instead of receiving a lump-sum, the borrower will get a revolving line of credit that works like a credit card.

A benefit of a HELOC is that you can borrow only what you need when you need it. And you are only charged interest on the amount you borrow, not the entire credit line. A HELOC works very much like a revolving credit card does.

Pros and Cons of Home Equity Loans and HELOC


  • Higher liquidity
  • Low-interest rate compared to other loans
  • Increase your home’s market value


  • High credit score requirement
  • Foreclosure possible if you cannot make payments
  • Lowers the amount of equity the homeowner has

See if You Qualify for a Home Equity Loan

Cash-Out Refinance

640 Credit Score Needed

Cash-out refinancing is a new loan that pays off the existing mortgage and provides the rest in cash, up to 80% of the loan-to-value ratio. The benefit of a cash-out refinance is that the borrower has one loan requiring just one payment.

They also have a lower credit requirement than home equity loans making them easier to qualify for.

Cash-out Refinance


  • Lower mortgage rate than HELOC
  • Fixed interest rate
  • 15 or 30-year repayment plans
  • Single payment


  • Closing costs are as high as getting a new mortgage
  • Lower the amount of equity in the home

Compare Loan Offers and Rates from Multiple Lenders

Government-Backed Rehabilitation Loans

203k Rehab Loan

Minimum 640 Credit Score

The Federal Housing Administration offers FHA loans and 203k rehab loans. A 203k loan is for properties that are in need of repair or renovations.

Borrowers’ will get a loan for the purchase of a property and up to $35,000 cash for repairs.

USDA Rehab Loan

Minimum 660 Score Required

USDA loans are for low-to-median income families who are buying in a home in eligible rural areas. A USDA rehab loan offers loans to low-income families to renovate or repair a home.


Is it possible to get a loan with no credit check, or poor credit?

All home improvement loans require a credit check and a home appraisal. You are able to borrow up to 80% of the market value of your home.

If you don’t have enough equity, or if your credit is not good enough to qualify for a home improvement loan you can look into a personal loan. Some lenders in our network offer personal loans to borrowers with credit scores as low as 580.

How can I increase my odds of getting approved?

Borrowers with good credit will qualify for the best loan terms and lowest interest rates. In some cases, such as a mortgage loan, good credit can save you tens of thousands of dollars over the course of the loan.

You want to make sure your credit score is as high as possible before applying.

Pay down credit card debt – If you’re currently using more than 35% of the available credit on your credit cards you should pay down the balance to less than 20% of the limit to maximize your score.

Apply with multiple lenders – You should also compare loan offers and rates with at least 3-4 different lenders to ensure you’re getting the best deal possible. These loan offers can also be used to help you negotiate loan terms.