For many Americans, a home equity loan is a go-to option for obtaining financing. A home equity loan is essentially a second mortgage, with your home serving as collateral for the loan. Because your home secures home equity loans, they typically offer lower interest rates than unsecured loans.

Like with any other type of loan, your credit score is essential in determining whether you'll be approved for a home equity loan. Considering your credit score it is also important to gain the knowledge on how to get a home equity loan with bad credit. Your credit score measures your creditworthiness or how likely you are to repay a loan. So what's the lowest credit score for a home equity loan?

While there's no definitive answer, most lenders require a credit score of at least 620 to qualify for a home equity loan. However, some lenders may have different requirements, so it's always best to check with multiple lenders to see what they're looking for. If your credit score is below 620, you may still be able to get a home equity loan. 

Here's what you need to know.

While your credit score is an essential factor that lenders consider when applying for a home equity loan, it's not the only factor. Your debt-to-income ratio (DTI) is another significant factor that lenders will look at. Your DTI measures how much debt you have relative to your income. The higher your DTI, the riskier you are seen as a borrower.

For example, let's say you have a monthly income of $5,000 and monthly debts (including your mortgage payment) of $2,500. Your DTI would be 50% ($2,500/$5,000). Most lenders prefer to see a DTI of 45% or less.

If your credit score is on the low end, but your DTI is strong, you may still be able to get a home equity loan with bad credit. The same is true if you have a high credit score but a high DTI. Generally, the higher your credit score and the lower your DTI, the better your chances of getting approved for a loan.

If your credit score is low, you may need a larger down payment to get approved for a home equity loan. For example, let's say you're looking to borrow $10,000. If your credit score is 620, you may need to put down 20% of the loan amount, or $2,000. However, if your credit score is 720, you may only need to put down 10% of the loan amount, or $1,000.

The size of your down payment will also affect your loan's interest rate. The larger your down payment, the lower your interest rate will be. This is because a larger down payment lowers the risk for the lender, making you a more attractive borrower.

You may have to pay a higher interest rate on your home equity loan if you have a low credit score. This is because you've seen yourself as a higher-risk borrower. For example, let's say that you're looking to borrow $10,000 and have a credit score of 620. If the prime rate is 3.25%, you may have to pay an interest rate of 7.25%. However, if your credit score is 720, you may only have to pay an interest rate of 4.25%.

While a higher interest rate means that you'll have to pay more in interest over the life of the loan, keep in mind that home equity loan rates are typically lower than rates for unsecured loans, such as personal loans. So even if you have to pay a higher interest rate, it will likely be lower than what you would get with another type of loan.

If your credit score is on the low end, you may need to work on building it up before you apply for a home equity loan. There are a few things you can do to improve your credit score, including:

One of the best ways to improve your credit score is to make sure you're paying your debts on time. Late payments can significantly negatively impact your score, so it's important to make sure that you're always making at least the minimum payment by the due date.

Your credit utilization refers to the amount of debt relative to your credit limit. For example, let's say that you have a $1,000 limit on one of your credit cards and a balance of $500. Your credit utilization would be 50% ($500/$1,000).

Most experts offering debt advice recommend keeping your credit utilization below 30%. So in the example above, you would want to keep your balance below $300.

Having a mix of different credit accounts can also help improve your credit score. For example, revolving credit (like credit cards) and installment loans (like student loans) can help improve your score.

Additionally, you need to maintain your old accounts. Closing an old credit account can hurt your credit score. It is best that they remain open even if you're not using them.

If you spot any errors on your credit report, be sure to dispute them right away. These errors can harm your score, so getting them corrected as soon as possible is essential.

You can get a copy of your credit report from any of the major credit bureaus once every year at AnnualCreditReport.com at no cost.

A secured credit card is a good option for people trying to build up their credit score. With a secured card, you deposit into a savings account, and then you're given a credit limit equal to your deposit. This deposit acts as collateral in case you default on your payments, so it's easier for issuers to approve people for these cards.

Remember that you'll want to avoid carrying a balance on your card, which can hurt your credit score. Also, make your payments on time and in full each month.

In summary, your credit score determines your likelihood of paying back a loan. 

What's the lowest credit score for a home equity loan? Most lenders have the limit at 620, but you can access a loan with a lower score. You may have to pay a higher interest rate on your home equity loan if you have a low credit score. Additionally, you may need to work on building up your credit score before you apply for a loan. 

You can do a few things to improve your credit score, including paying your debts on time, keeping your credit utilization low, and getting a mix of credit accounts. You can also check for errors on your credit report and consider getting a secured credit card.