Can I get a home equity loan with a credit score under 500?

Question

My husband and I own our home free and clear and have been having trouble getting financing because of our credit score. I am guessing that our home is worth approx $125k, I am guessing. (our neighbors said theirs actually appraised for quite a bit more) We would like to borrow $50k-$80K to pay off unsecured debt and clean up our credit. Will this even be possible?

The only reason why we are here is because, our family business went under and we are trying to get back on our feet. The high intrest on our credit cards is making it impossible to pay them, after such a dramatic change in our families lives.

Answer 1

You cant get much of any loan with that credit score. There are some small things you can do to boost your chances..

Here are my 10 steps you can use to build your credit score quickly. I raised mine to well over 700 points fro 500 using these steps in less than a year -- :

# Know and Track Your Credit Score (be sure to sign up for the free trial of your credit score monitoring listed on the article below. It really helped my get my score up.)
# Never Miss a Payment, Starting Today
# Never use more than 20% of your Available Credit
# Keep Credit Cards that Have No Annual Fees Open For as Long as Possible
# Extend Your Credit Limit on Cards You Already Have before You Get New Ones
# Get Credit Cards that Have CashBack Rewards to Contribute to your Balance
# Transfer Your Balance to a Credit Card with a Lower Interest Rate and a Higher Available Credit-
# If You Think You Are Going to be FORCED to Pay a Bill Late Ask for an Extension or Payment Plan
# Take out a Small Personal Loan and Repay it Over a Year
# Ask Someone With Good Credit if They will Account Shadow you

When you're trying to rebuild your credit score it's important to get a comprehensive view of what is actually effecting it...

Your Credit Score is calculated with the following breakdown:
35% - Payment History
30% - Credit to Debt Ratio
15% - Credit History
10% - New Credit
10% - Credit Types in Use

If you excel in one area and lack in another, only fixing the areas which you lack are going to improve your score.

I've got a lot of information on my blog about credit scores, and I get a lot of questions so feel free to check out any of my posts on millionster.com; I believe my articles here address many of your concerns but if they don't and you still have any specific questions feel free to leave a comment and I'll reply.

How Can I Increase My Credit Score
http://millionster.com/articles/debt/ask-1mil-how-can-i-increase-my-credit-score/

and

10-Ways to Boost Your MyFico Score
http://millionster.com/articles/debt/increase-fico-credit-score/

Also be sure to check out the promotional links I've listed here to help you get a better picture of your creditworthiness:

MyFico's Full Credit Report
http://millionster.com/go/myfico

Suze Orman's Credit Report Repair Kit
http://millionster.com/go/suzekit

30-day Trial of Credit Score Tracker with Free MyFico Score
http://millionster.com/go/fico30

Answer 2

You may be able to get a secured loan from a bank by signing over your home as collateral, but your credit score is based on how well you "borrow". In other words, the way to a good credit score is to borrow often and pay it back always on time. Evidently, you have some bad debts and this is affecting your credit score. I'm surprised you can't find a sub-prime to lend to you at some ridiculous rate, though. Just because your house may be worth $125K doesn't mean you will pay back the loan and this is what the lender is looking at.

My question is "What's the point of borrowing money from one place to pay off a different debt?" I'm not an expert but the guy whose website I linked below is. He teaches a way to live your life without having to go into debt and has gotten a lot of people out of debt over the years. Hope this helps.

One thing to keep in mind is that money problems aren't caused by money and they won't be solved by money, either.

Answer 3

You could if you don't mind paying a huge finance charge and 25% interest.

Getting a home loan to pay off credit cards rarely works in the long run...

People get the home equity loan, the credit cards have 0 ballance... they say "WOW we can buy stuff!" and... pretty soon the credit cards are maxed again AND they owe a huge mortgage and they can't pay any of the payments on anything.

So...

QUIT BUYING STUFF YOU DON'T NEED.

Turn off the cable TV and satellite.
Turn off your internet connection... you can't afford it. Use the computer at the library for e-mail.
Don't buy ANYTHING if you don't have actual green cash in your pocket to pay for it.
Don't put the green stuff in your pocket until all the bills are paid every month.

Learn to live within your means.

BTW... look at how much you are paying in finance charges every month. Think how much more you could afford if you didn't have to pay that interest and late charges....

Answer 4

Sell your home and your problems are solved. Seriously, you can pay off your debt and still probably walk away with a little money for a down payment later. If you take an equity loan you are just shuffling your old debt into this new debt. I would sell the house.

Answer 5

Better option instead of putting your home at risk is going to consumer credit counseling service, they will get the interest rates down, late charges removed, and give you one payment a month to make, and the services are free. If you mortgage your home and it will be at a high rate of interest you will lose money in the long run, and possibly your home. DO not take that route you will be heading for disaster

Answer 6

If my sister in law can get financed anyone can.
right now loan company's are falling all over themselves to make secure loans ;For your home they would be in a can't lose situation. be careful make sure the gremlins that ran up that unsecured debt are gone for good.And the reasons for the poor credit are history, because you are letting your home bail you out, next time you are looking at the street.

Answer 7

Yep, not a problem. You will probably want a regular home loan not a credit line since they are more expensive. Ask a local mortgage broker, they should be able to help. This will not be cheap, but it is possible.

Answer 8

If your score is500 it will be very hard.try to get it up to 580 and u won't have a problem.THE FASTEST WAY IS TO PAY OFF A FEW CREDIT CARDS AND THAT SHOULD DO THE TRICK.**** LUCK.