When it comes to tapping into your home’s equity, a Home Equity Line of Credit (HELOC) can be a flexible and powerful financial tool. But what if your credit score isn’t perfect? If you’re sitting at a 640 FICO score, you might be wondering: Is a HELOC still within reach?

The short answer: Yes, but with caveats. While a 640 credit score is considered "fair" by most lenders, it may limit your options and come with higher interest rates. In today’s volatile economic climate—marked by inflation, rising interest rates, and shifting lending standards—understanding your HELOC eligibility is more important than ever.

Understanding HELOCs and Credit Scores

What Is a HELOC?

A HELOC is a revolving line of credit secured by your home’s equity. Unlike a traditional home equity loan (which provides a lump sum), a HELOC works like a credit card—you can borrow, repay, and borrow again during the "draw period" (usually 5-10 years). After that, you enter the repayment phase.

Why Does Your Credit Score Matter?

Lenders use credit scores to assess risk. A higher score (typically 700+) signals reliability, while a lower score (like 640) may raise red flags. Your credit score affects:
- Approval odds – Some lenders have strict minimums (often 660+).
- Interest rates – Lower scores usually mean higher APRs.
- Loan terms – You might face stricter conditions or lower credit limits.

Can You Qualify for a HELOC With a 640 Score?

Lender Requirements Vary

Not all lenders treat a 640 score the same. Here’s what to expect:

• Traditional banks & credit unions: Often require 680+ but may make exceptions for strong equity or income.
• Online lenders & fintech companies: Some specialize in "subprime" borrowers and may accept 620-640.
• Portfolio lenders (local/regional banks): More flexible underwriting, especially if you have a long-standing relationship.

Other Factors That Influence Approval

Your credit score isn’t the only deciding factor. Lenders also weigh:

1. Loan-to-Value (LTV) Ratio – Most lenders cap HELOCs at 80-85% LTV. If you have significant equity, this can offset a lower score.
2. Debt-to-Income (DTI) Ratio – Ideally under 43%. High debt? You might need a co-signer.
3. Employment & Income Stability – Steady earnings reassure lenders.
4. Payment History – Late mortgage payments hurt more than other credit mishaps.

Challenges of Getting a HELOC With a 640 Score

Higher Interest Rates

Borrowers with fair credit often pay 1-3% higher rates than those with excellent scores. In today’s high-rate environment (where the Fed has pushed rates to 5.25-5.5%), this could mean APRs of 9-12% instead of 6-8%.

Stricter Terms

• Lower credit limits – You might qualify for 50-60% of your equity instead of 80%.
• Shorter draw periods – Some lenders may reduce the borrowing window.
• Fees – Origination fees or annual charges could apply.

Fewer Lender Options

Major banks like Chase or Bank of America typically favor 700+ scores. You may need to shop around with:
- Credit unions (e.g., Navy Federal, if eligible)
- Online lenders like Figure or Spring EQ
- Community banks

How to Improve Your Chances

Boost Your Credit Score Before Applying

Even small improvements can help. Try:
- Paying down credit card balances (aim for <30% utilization).
- Disputing errors on your credit report (common with low scores).
- Avoiding new credit inquiries for 3-6 months before applying.

Reduce Your DTI

Pay off small debts or increase income (e.g., side hustles) to lower your DTI.

Consider a Co-Signer

A spouse or family member with strong credit can strengthen your application.

Shop Around

Get quotes from 3-5 lenders. Some may offer "soft pulls" that don’t hurt your score.

Alternatives to a HELOC

If a HELOC isn’t feasible, explore:

Cash-Out Refinance

Replace your mortgage with a larger loan and take the difference in cash. Requires decent credit (often 620+).

Personal Loans

Unsecured, but rates can be steep (10-36% APR).

Shared Equity Agreements

Companies like Unlock or Point offer cash for a share of future home appreciation—no monthly payments, but you sacrifice equity.

The Bottom Line

A 640 credit score doesn’t disqualify you from a HELOC, but it narrows your path. In today’s tight lending market, preparation is key: strengthen your credit, compare lenders, and weigh all options. For many homeowners, the flexibility of a HELOC—even at a higher rate—can still be a smart way to fund renovations, consolidate debt, or cover emergencies.

Just remember: Your home is collateral. Defaulting risks foreclosure, so borrow responsibly.