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Home Equity Line of Credit Bad Credit

It is possible for a person with bad credit to get a home equity line of credit. Unfortunately a person with a bad credit rating will have to pay a higher interest rate on a home equity line of credit.

A person with a bad credit rating can get a home equity line of credit because a home equity line of credit is secured. This means that the line of credit is secured by collateral in the form of equity in the home. Since the line of credit is secured the lender can foreclose on the house if it is not paid.

Lenders will charge a higher interest rate on a home equity line of credit for an individual with bad credit because they take a higher risk lending to such people. Lenders consider those with a bad or low credit rating a higher risk of foreclosure.

Qualifying for a Home Equity Line of Credit with Bad Credit

Most banks won’t give a home equity line of credit to a person with bad credit but many internet lenders will. A person can locate these lenders by doing a search on “home equity line of credit bad credit.” Such a search should reveal a list of lenders who are willing to give lines of credit to those with bad credit.

These lenders will charge a much higher interest rate and may impose stricter terms on such a line of credit. Generally the interest rates on home equity lines of credit are set by whether the person has bad, poor, good or excellent credit. Those with bad credit will pay the highest rates which means they’ll pay more for credit and have less credit available.

Comparing line of credit offers can help a person locate a line of credit with a better rate. Some lenders maybe willing to extend more credit to those with bad credit than others. Even a person with bad credit can get a better deal on a home equity line of credit by shopping around for one.

Your Credit Rate and Home Equity Lines of Credit

Before applying for a home equity line of credit bad credit it’s a good idea for a person to try and clean up their credit rate. The first step in cleaning up your credit rate is to order a copy of credit report as compiled by the big three credit unions (Trans Union, Experian and Equifax).

These agencies have to send you a copy of your credit report if you go to their website. You should check the credit report for false and inaccurate information and information that shouldn’t be there such as debts discharged by bankruptcy. Many experts note that most credit reports contain information that is wrong.

If you find information that is wrong on your credit report you can have the credit agencies remove it. Removing bad information from a credit report can increase your credit score and the amount of credit you can get.

Adding just a few points to your credit report can help you pay less for a home equity line of credit. It can also help you get more credit.

Drawbacks to Home Equity Line of Credit Bad Credit

Taking out new home equity lines of credit or applying for home equity lines of credit can cause your credit score to fall. This can make it harder to borrow money and in some cases to rent property or apply for jobs.

You will also have to pay your line of credit back in the future. This can make credit available to you now but require you to make additional payments in the future. This could reduce your disposable income in the future.