Home Equity Loans Bad Credit

Getting a home equity loan with bad credit is one way to bring up your credit score eventually. It may not happen immediately, because you are taking on a new loan and will have one or more new inquiries on your credit record. If your credit score is low because you have a lot of old debt, late payments and other problems, you can use home equity loan money to consolidate all your bills when you pay them off with that money.

In a couple months, the paid off bills will reflect on the credit record as positive entries. As long as you continue to be good at making every new loan payment on time, and keep paying good on your existing first mortgage, in no time the credit score could move up to good instead of bad, poor or fair.

Once you have boosted your credit score up to a good or excellent rating, you can again refinance the bad credit equity home loan and get an even better low interest rate. This process will take some time, but with home loans and home equity loans the terms are from 5 to 30 years, so taking a year or so to improve your credit score will pay off in the long run. Some home equity rates are even below those rates for first mortgages because they are much shorter term loans and will be repaid very quickly, in 1 to 5 years. As you get into better credit score territory, you can slowly switch over all loans to lower interest loans.

Plan ahead and find the best lender with the best bad credit equity loans before you do anything firm. Only allow that one chosen lender to run your credit record inquiry. Bad or poor credit can be improved over a few months. Keep any accounts open, but stop using them. Pay off or down to under 30% of your credit limits on each one. Find more income and keep your job. Be very stable and an excellent bill payer for at least six months and then see how much your credit score has improved. You can obtain your own credit score for a small fee.

Credit reporting agencies (CRAs) have a website (www.annualcreditreport.com) where you are allowed a free look at each of three CRA credit histories for yourself. You can print out the report or have it mailed to you. Look at it carefully to find any mistakes that you can then report to them in writing. They will investigate and determine if there is a mistake to be corrected. Your inquiry will not lower your credit score at all.

Equity loans with bad credit are easier to get because the home is used for collateral. Interest rates on home equity loans are just a tad higher than those for first mortgages because there is a tad more risk to the lender. Second mortgages and equity loans are only paid off in the case of default after any first mortgage is paid in full.