Home equity line of credit (HELOC) borrowing was on the rise at the end of 2024, continuing a trend that's been years in the making, according to data. HELOCs are a popular tool for homeowners thanks to their flexibility, not to mention the fact that homeowners are sitting on record amounts of tappable equity.

"Home ownership can come with many unexpected and expensive repair and maintenance needs," says Amy Phelps, a branch manager at Tompkins Community Bank in Syracuse. "A HELOC provides a safety net for homeowners to tap into for emergencies, typically offering rates well below what most credit cards offer and allows for a higher limit than most credit cards as well."

However, HELOCs are becoming more challenging for many borrowers to qualify for due to a few key economic and personal finance factors, including rising interest rates. While HELOC rates were falling just a few months ago, they're sitting a bit higher today.

If you've been denied a HELOC or are worried about getting denied, now is the time to take action. We spoke with several lending and home equity experts to find out some common reasons for HELOC denials right now and what borrowers can do if they're denied.

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What to do if you can't qualify for a HELOC

"If you are hitting a wall with approval, blame the trifecta: higher rates, tighter underwriting, and spooked lenders," says Eric Croak, CFP and President of Croak Capital.

With HELOC rates sitting a bit higher in late July, borrowers' money isn't going as far. And if your debt-to-income ratio (DTI) is too high to support the new debt, that, combined with the increased interest rates, could make it challenging to get approved for the amount you want.

Of course, other factors could be at play too. For example, many lenders won't let you exceed 80% LTV (short for loan-to-value ratio) on your home. That includes your mortgage, so if you owe too much on your home loan or any other home equity products, you may simply not have sufficient home equity to qualify.

It's also worth considering whether your credit score is enough to qualify for a HELOC. While the requirements may vary from lender to lender, most want a credit score in the mid-600s or higher.

"It's not personal, it's just math. Lenders do not want late payments when their funding costs are already up," says Croak.

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Expert-backed strategies to improve your approval odds

"If you're denied a HELOC, the first step is to ask your lender for the specific reasons behind the decision. That insight helps you understand what to work on, whether it's your credit score, income, or debt levels," says Dan Bauer, Head of Residential Lending at Alliant Credit Union.

Knowing why your application was denied will give you the information you need to get your finances in better shape and apply again. However, if you haven't applied for a HELOC yet and want to give yourself the best shot at approval, you have the chance to be a bit more proactive.

"Having a strong financial profile on paper is the best way to improve your chances of HELOC approval," says Bauer. "Checking your credit, reducing debt, and ensuring your finances are in order before you apply can boost your odds significantly."

Your credit score will be a key factor with any lender, so make sure you review your credit report, have any errors removed, and work on boosting your credit score. While most lenders require a score in the mid-600s, you can improve your chances by getting yours even higher.

Finally, don't assume all lenders and loan products have the same requirements. While you may have been denied a HELOC from one lender, you may be approved from another if you shop around. Additionally, there are other lending products you can use instead that may be a better fit for your financial situation.

HELOC alternatives to know

If you've been denied a HELOC or are worried about meeting the eligibility requirements, consider a different lending product that can fit your needs.

A home equity loan also taps into your accumulated home equity. With their fixed interest rates and monthly payments, home equity loans make you less vulnerable to interest rate fluctuations. However, you'll be subject to similar credit and equity requirements.

Another product our experts recommend to tap into your home equity is a cash-out refinance. In this instance, you'll take out a new mortgage and pay off the existing one, keeping the difference as cash for yourself. It may be a good option if your financial situation has improved since you borrowed your mortgage. But if you're currently locked in at a low interest rate — for example, if you got your mortgage in 2020 or 2021 — then a cash-out refinance will make your mortgage more expensive.

You may also consider products that don't require you to borrow against your home equity, such as a personal loan. There are no home equity requirements, and there are personal loans with laxer credit requirements. However, expect to pay a higher interest rate. That said, not using your home as collateral, as you would with a home equity loan or HELOC, could be attractive.

"Both cash-out refinances and personal loans can be used for many of the same expenses homeowners consider a HELOC for, like home improvements, debt consolidation, or unexpected costs," says Bauer.

Another alternative worth considering, according to Jeffrey M. Ruben, the President of WSFS Mortgage at WSFS Bank, is a credit card, but only in select situations. "Credit cards can be useful for smaller projects, but interest rates can be high, and this is best for individuals who are disciplined enough to pay them back," says Ruben. A credit card may also be best suited to someone with good credit who can qualify for a 0% APR introductory rate and then pay off the card before that intro period ends.

According to Ruben, home equity rates will almost always beat out personal loan or credit card rates, so that's the better place to start, if you qualify.

The bottom line

HELOCs are still a great tool for homeowners who have seen their equity increase substantially over the past five years and who want to tap into it. But with lenders tightening their eligibility requirements, you may have a harder time qualifying.

Whether you've already been denied a HELOC or you simply want to give yourself the best chance at approval, there are plenty of steps you can take, from increasing your credit score to paying off debt to freeing up more of your monthly budget. And if all else fails, consider one of the many alternative borrowing tools that might fit your needs.