Credits and Loans

How to Get a Home Improvement Loan with Bad Credit

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Owning a home is exciting, but what’s even better is the ability to renovate your home and turn it into your dream abode. Some necessary improvements like an Xpert Electric LLC – Electrical panel upgrade in Bentonville can be saved up for with a bit of budgeting or rainy day savings. Others only cost a few hundred dollars and could easily be done DIY style to boot. However some renovations, like having your roof replaced by someone like Carolina Home Specialists (, can be quite costly. In this instance, taking out a loan is often the best option.

Does your credit score fall within the good to poor range? Is your credit history not the greatest? While a bad credit standing increases your risk as a borrower, having bad credit doesn’t totally disqualify you from getting approved for a home improvement loan.

Here’s what you need to know about getting approved for home repair loans.

Know Your Credit Standing

There are several scoring systems used in order to determine your credit score, but more often than not, your scores from the three main credit bureaus won’t differ by a huge amount. Most credit score methods use a sliding scale that ranges from 300 to 850.

A credit score below 550 is considered bad. Scores at 550 or below are considered poor. A credit score at 650 to 699 is considered fair. Scores between 700 and 749 are considered good while scores 750 or above are considered excellent.

As someone with bad credit, chances are you fall within the fair to bad range. While your score makes it harder to get approved for a home improvement loan, it’s not impossible. Here’s what you can do to boost your chances.

Use a Co-signer

Chances are that you have a close friend or family member that has a decent credit standing. If so, you could use this person as a co-signer on your home improvement loan. With a co-signer, your risk of defaulting is far less probable. In turn, a lender will be more likely to approve your application.

When using a co-signer, be sure that this person has a solid credit score and history. Co-signing a loan with someone who has fair credit likely won’t result in the outcome you’re seeking. Use a co-signer that has a good credit score and has stable income.

While there is a second name on the loan, having a co-signer doesn’t negate your need to make monthly payments. Not making payments can impact not only your credit score, but also your co-signer’s.

Consider a Home Equity Loan

Have you owned your home for a few years? Did you purchase your home with equity in it? If so, you may want to consider applying for a home equity loan or home equity line of credit. While a lender will still look at your credit standing when processing your loan application, using your home as collateral to back the loan lessens the lender’s risk. Since your home is used as collateral, the lender has a lower chance of losing money.

When applying for a home equity loan or line of credit, know that you cannot take out a loan against the full amount of equity. For example, if you have $100k in equity in your home, a lender may only let you take $70k. If this is something you’re interested in, you can determine how much you’re eligible to borrow against your home by taking a look here and using the home equity line of credit calculator.

Apply for a Government Loan

If you’re unable to get approved for a loan through a traditional lender, consider applying for a government loan. These loans, which are backed by the U.S. Department of Housing and Urban Development (HUD), can be used for home renovations as well as home rehabilitation projects.

One of the most common HUD programs is the FHA’s Streamlined 203(k). This loan allows homeowners to borrow up to $35k to upgrade, improve, or repair their homes. There’s also the FHA Title 1 loan which allows those who are unable to get approved for a traditional home improvement loan to get access to the funds they need.

Don’t Finance At All

While this is the toughest option, it’s worth considering. If you have bad credit, you may be better off taking the time to repair your credit and saving up for renovation costs versus borrowing money. While it will take time to save thousands of dollars for a big project, consider tackling smaller projects. For example, if you want to renovate your bathroom, try:

  • Re-grouting the tiles
  • Installing new flooring
  • Installing new hardware (ie. sink faucet, shower head, etc.)
  • Applying a fresh paint of coat
  • Refinishing the shower or tub

As you check smaller projects off of your list, you can save for a larger project and work towards improving your credit score. Talk about a win/win!


Bad credit can be a showstopper when it comes to getting approved for a home improvement loan. If you’re stuck with bad credit but are anxious to renovate your house, keep these options in mind. Most importantly, focus on improving your credit to prevent this issue in the future.

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