HELOC vs Home Equity Loan When Your Credit Score Is Below 670

The Quick Read: Below 670, your credit tier, combined loan-to-value, and the property that secures the loan matter more than the product shape. A HELOC suits flexible borrowing against a primary home, a home equity loan suits one lump sum on a set schedule, and neither usually fits an LLC-owned rental. A HELOC is a home equity line of credit, a loan you draw on against the value of your home.

• Across Lendmire’s wholesale network, a HELOC on a primary home starts at a 600 credit floor, a second home at 640, and an investment property at 700.
• A sub-670 score also lowers how much combined loan-to-value (CLTV) a lender allows. CLTV is your first mortgage plus the new loan, divided by the property’s value.
• Debt-to-income (DTI) tightens too. DTI is your monthly debts divided by your monthly income, and the maximum is 45% for scores from 600 to 679.
• Title matters. Lines in this network must be held by an individual or a revocable living trust, not an LLC.
• A rental owner whose credit sits below 670 often gets a better look from a DSCR cash-out refinance, which qualifies primarily on property-level rental income covering the payment, subject to lender guidelines.

The honest answer on who each option is for: a HELOC fits a borrower with a primary home, solid equity, and a plan to draw in stages. A home equity loan fits a borrower who knows the exact amount needed and wants a fixed schedule. For a rental owner with a score in the 600s, the real choice is often a different product altogether.

Side-by-Side

The left column reflects Lendmire’s wholesale network guidelines for a HELOC. The right column shows published industry norms for a closed-end home equity loan. Lendmire’s network places both kinds of products, and every figure is subject to lender guidelines and full file review.

The two products look alike on the qualification row for a reason. Both are underwritten on you, not on the property’s rent. A weak score hurts either one in much the same way.

When a HELOC Is the Better Fit

A HELOC fits when you own a primary home with real equity, expect to spend in stages, and can handle a payment that moves with the balance. The CFPB describes a HELOC as an open-end line with a draw period followed by a repayment period. Repayments can replenish the available credit during the draw.

On this network, the line is less flexible than that textbook picture. At least 75% of the line is drawn at closing. Pricing floats across both the draw and the repayment period and never converts to fixed. After closing, a borrower can take further draws of at least $1,000 on the longer-runway structure described below, though the minimum is higher in Texas.

Two draw structures exist on primary residences and second homes:

• A 3-year interest-only draw followed by a 17-year fully amortizing repayment.
• A 5-year interest-only draw followed by a 25-year fully amortizing repayment.

Investment lines run the 5-year draw and 25-year repayment structure only. Tennessee shortens both structures on primary and second homes.

A HELOC also makes sense when you want to keep the first mortgage untouched. The network places standalone lines in first or second lien position, so an existing low-cost first mortgage can stay in place. Valuation is usually light too. Lines at or below $500,000 ordinarily use an automated valuation instead of a traditional appraisal, though a higher CLTV may require a secondary valuation.

The catch is the variable payment. Lenders here qualify you on the interest-only payment calculated on the maximum draw, so the file is judged at full usage. That is a useful stress test for your own budget as well.

When a Home Equity Loan Is the Better Fit

A home equity loan fits when you need one known amount and want payments that never move. The CFPB explains that a home equity loan pays out as a lump sum. It may carry a fixed or an adjustable structure, while a HELOC usually carries an adjustable one.

For a sub-670 borrower, the fixed schedule is the main advantage. A weaker score often means a thinner cushion in your budget. Knowing the payment for the whole term removes one source of surprise.

A home equity loan also suits a borrower who would be tempted by open credit. A line stays available during the draw period, and some people spend it. A closed-end loan ends the question on closing day.

Published industry norms say a home equity loan and a HELOC usually carry similar requirements. So a score of 640 or 660 does not automatically favor one over the other. Lenders compare equity, DTI, and credit together, and the weakest of the three often sets the limit. Many lenders also sit above a 670 floor, so shopping several lenders matters more than picking a product.

What a Score Below 670 Changes on the HELOC Side

In this network, a lower score cuts the CLTV a lender allows and shrinks the maximum line. The figures below apply to HELOCs on primary residences and second homes, and each tier is subject to lender guidelines.

On a primary residence, a 640 score unlocks a meaningfully higher limit than a 630. Second homes floor at 640. Investment properties floor at 700, so a score below 670 cannot qualify for a HELOC on a rental in this network.

Other rules shape a sub-670 file:

• A ratio above 45% requires a 680 minimum.
• The score is a single-bureau figure keyed to the primary wage earner. The credit report must be no more than 90 days old at closing, and rescores are not available.
• Foreclosure history splits by program on primary residences and second homes. One wholesale program seasons a foreclosure at 7 years and a deed-in-lieu, pre-foreclosure, or short sale at 4. Another declines the history regardless of age.
• Profiles under 640 are limited to single-family residences with a clean 12-month housing history under the longer-runway program. That program is the 5-year-draw, 25-year-repayment structure. Because second homes floor at 640 and investment properties at 700, this restriction reaches primary residences only.
• Some states apply their own caps or waiting periods on primary residences, so state of residence can change the numbers.

Availability is narrower than the DSCR footprint. HELOCs through Lendmire’s network are limited to 16 states: AL, CA, CO, FL, GA, IN, MI, MT, NM, NC, OH, PA, TN, TX, VA, and WA. DSCR investor loans cover 41 markets, including Washington, D.C.

What If the Collateral Is a Rental?

A rental changes the answer more than the product does. Published industry norms say a HELOC or home equity loan on an investment property is harder to get than one on a primary home. The lender pool is smaller, and lenders treat the property as higher risk.

Entity title adds a second wall. In this network, only an individual or an inter vivos revocable living trust can hold title. LLCs, corporations, partnerships, and irrevocable, blind, or land trusts cannot. A property already deeded to an LLC needs a vesting change or a different structure.

Here a DSCR cash-out refinance enters the picture. DSCR stands for debt service coverage ratio, which compares a property’s monthly rent to its monthly payment of principal, interest, taxes, insurance, and any association dues. The loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines, so a thin personal DTI matters less. Lendmire’s complete DSCR loans guide covers the full mechanics.

Typical network figures for a standard rental cash-out:

• Leverage tops out around 75% LTV on a cash-out refinance of a standard rental, with about 6 months of seasoning as the common expectation.
• Credit floors start at 620 in parts of the network, most programs want around 660, and 700 or higher opens the strongest leverage tiers.
• Reserves vary by lender, leverage, loan size, and transaction type. About 6 months of PITIA (principal, interest, taxes, insurance, and association dues) is common, and loans above $1,500,000 typically step up to about 9 months.
• Standard loan sizes reach up to $3,000,000 on standard programs, with smaller balances available through select lenders.
• A coverage ratio of 1.00 is where select programs start, and stronger ratios open better terms. A separate select-lender path takes coverage below 1.00, with leverage and terms adjusted.

One caution applies to any rental borrower. Clearing 1.00 does not mean the property produces positive cash flow. Repairs, vacancy, management, utilities, and capital expenses sit outside the calculation.

Lendmire’s own writing on investment property HELOC requirements when your credit score is below 670 goes deeper on the rental side. A separate comparison looks at DSCR HELOC vs DSCR cash-out refinance when your credit score is below 670.

Risks Both Options Share

Both products are second mortgages when a first mortgage already exists, and both put the home at risk. Either one can lead to the loss of your home if you cannot repay.

That risk matters more when the borrowed money goes into rentals. If a tenant leaves or a repair runs long, the payment still comes due, and your residence is the collateral. A primary-home line used for investing ties your housing to the performance of a different property.

Other points to weigh:

• A line’s variable payment can move with the balance, and a draw period ending moves you into full repayment.
• If you sell the home, a HELOC generally must be paid off in full.
• Lenders can freeze or reduce a line if the home’s value falls.
• A line’s terms may restrict renting out the home.
• Tax treatment can depend on how the funds are used and how the property is held; borrowers should keep clear records and speak with a qualified tax professional before relying on any deduction.

A simple stress test helps before you sign. Assume the full line is drawn, income dips, and a rental sits vacant for a stretch. If you can still carry every payment, the structure is sound. If you cannot, borrow less or wait.

Should You Wait and Raise Your Score First?

Sometimes waiting is the better financial move. Crossing a tier line changes the terms. On a primary residence, a move from 639 to 640 raises the CLTV limit from 70% to 80% and the maximum line from $400,000 to $500,000. A move from 659 to 660 lifts it again to 85%. Reaching 700 opens the investment-property line, and reaching 680 lifts the DTI ceiling above 45%.

Waiting costs something too. Equity sits idle, and a rental opportunity may not hold. A reasonable rule: if you are within a tier of a meaningful step up, paying down card balances for a short stretch may be worth it. If you are 40 points away, evaluate the options available now.

The Verdict

Pick the HELOC if you own a primary home with equity, expect staged spending, and can absorb a payment that moves. Pick the home equity loan if you want one amount and a fixed schedule. Between them, a sub-670 score changes the terms more than the product shape does.

Pick neither if the collateral is an LLC-owned rental or a property you could only finance at a score below 700. In that case, a DSCR cash-out refinance or purchase loan judges the property’s rent instead of your personal debt ratios.

Next Step

If you are considering a home equity line and want to see how the numbers work, Lendmire can help you compare HELOC options based on the property, the equity available, credit profile, combined leverage, and your goals. Lendmire is a broker that arranges financing through select lenders in its wholesale network, and nothing here is a commitment to lend. Calculator estimates on the site are illustrative only.

About Lendmire

Lendmire — NMLS# 2371349 — is a mortgage broker that arranges home equity lines of credit in its 16 full-service states through wholesale lenders, on primary residences, second homes and investment properties. Every line is subject to the lender’s guidelines and full underwriting. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.

References

1. CFPB – What is a HELOC

2. CFPB – Difference between a home equity loan and a HELOC