Credit Score Requirements to Refinance a Home

If you’re determined to refinance your mortgage loan, you’ll need to know an important metric: your FICO credit score. This three-digit number indicates your creditworthiness and will help determine if you are eligible for a refi loan and the interest rate you qualify for.

Every loan type has different minimum credit score requirements: for a conventional refi loan it’s at least 620, but the lowest score allowed for other loan types ranges from 580 to 700.

Take the time to better understand the minimum credit score to refinance a home you’ll need as well as mortgage refinance options when you have bad credit as well as strategies for increasing your credit score prior to refinancing.

Highlights

• Your credit score directly impacts your eligibility for a mortgage refinance, the interest rate you qualify for, and loan terms.
• Minimum credit score requirements vary by loan type, ranging from 580 for FHA loans to 700 or higher for jumbo loans.
• FHA, VA, and USDA streamline refinances offer options for borrowers with bad credit or no formal credit check.
• Improving your credit score before refinancing can be achieved through strategies like paying down balances, correcting credit report errors, and avoiding new credit inquiries.
• Refinancing can help lower your mortgage payments, but preparation and maintaining a strong credit profile are crucial for securing the best terms.

What Credit Score Do You Need to Refinance Your Mortgage?

Having a good credit score is important when refinancing because this score directly affects the interest rate you’ll receive, the terms of the loan, and your overall eligibility.

“Lenders use your credit score as a primary measure of risk. The higher the score, the less risk they perceive – leading to more favorable loan conditions,” explains Dennis Shirshikov, a finance professor at City University of New York/Queens College.

Adam Spigelman, senior vice president at Planet Home Lending, notes that a preferred credit score is particularly crucial when refinancing to a conventional loan.

“While FHA loans and VA loans are more forgiving, a strong credit score still improves your overall loan profile and can lead to better outcomes,” he says.

Keep in mind that other factors – including your assets, loan-to-value ratio (LTV), debt-to-income (DTI) ratio, and late payments – can also influence whether or not you will be approved for a refinance loan and what rate you will pay.

“For a conventional refinance, the maximum allowable DTI is typically 45%, although some programs may allow higher DTI ratios with compensating factors, including FHA loans, which permit DTIs up to 50%. VA loans and USDA loans, on the other hand, have no fixed limit but generally prefer DTIs below 41%,” says Carl Holman, director of Communications and Content for A&D Mortgage. “Cash-out refinances may also require you to retain at least 20% equity in your home after refinancing.”

Here’s a quick breakdown of the minimum credit score often required based on loan type:

Refinance Loan Type	Minimum Credit Score*
Conventional	620
FHA	580
FHA streamline	620
VA	620**
VA streamline (IRRRL)	620**
USDA	640**
USDA Streamlined Assist	620**
Jumbo	680
Cash-out refinance	620

*May vary depending on lender’s requirements

**No minimum actually required by VA or USDA

Let’s take a closer look at the lowest credit score you’ll likely need based on the type of loan you choose.

Conventional

A rate-and-term refinance with a conventional loan typically requires a credit score of at least 620.

“However, to access the best interest rates, aim for a score of 740 or higher. Anything below 620 might still get you approved, but the terms could be less favorable – such as higher interest rates or additional fees,” suggests Andrei Bergeron, vice president of sales at RedAwning.com and a licensed mortgage originator.

FHA

An FHA refinance loan provides more flexibility with credit scores, often permitting scores of 580 or even as low as 500 with compensating factors.

“FHA streamline refinances don’t have a formal credit score requirement if your current loan is in good standing,” Holman says. “Also, it may not require a credit check, which makes it an excellent option for those with lower credit scores.”

Spigelman notes that having a clean payment history is important with an FHA refi, “especially if you are refinancing with the same servicer.”

VA

If you are an active duty military member, veteran, or surviving spouse who qualifies for a VA refinance loan, the good news is that credit score requirements are generally more lenient than conventional loans.

While the U.S. Department of Veterans Affairs, which backs this loan, doesn’t have a minimum credit score requirement, aim for a score of 620 or higher, whether it’s a streamline refinance (also called an Interest Rate Reduction Refinance Loan, or IRRRL, which doesn’t require a credit check) or a normal VA refi.

“If you’ve had any late payments, however, you need to be current at closing and already participating in these VA loan programs,” cautions Spigelman.

USDA

Geared toward rural and suburban home buyers, a USDA loan could require a credit score of 640 or higher for a standard refinance, although the U.S. Department of Agriculture backing this loan doesn’t technically impose a specific minimum credit score.

“The USDA Streamlined Assist refinance, which is designed to make refinancing easier for existing USDA borrowers, also doesn’t have a strict credit score requirement, although a 620 score is generally seen as favorable,” Bergeron continues.

Jumbo

Jumbo loan refinances often require a higher credit score – typically 700 or above – due to the larger loan amounts permitted and the increased risk for lenders, Shirshikov points out. If you’re refinancing to a shorter term—such as 15 years—your credit score may need to be 740 or higher.

Cash-Out Refinance

For borrowers seeking to tap into their home equity via a cash-out refinance, credit score minimums can vary significantly depending on the loan type.

“Generally, you’ll need a score of at least 620 for conventional loan cash-out refis, but to access the best rates a score of 700 or higher is often necessary,” Bergeron explains. “FHA cash-out refinances, meanwhile, may require a score of 600 to 620, depending on the lender.”

Mortgage Refinance Options with Bad Credit

Refinancing when you have bad credit (as indicated by a credit score below 580) is challenging but not impossible.

“Programs like the FHA streamline, VA IRRRL, and USDA Streamlined Assist are specifically designed to help borrowers with less-than-perfect credit,” says Holman.

The FHA streamline refinance, for example, doesn’t have a formal credit score requirement – so long as you are current on your payments.

“This is designed for existing FHA borrowers and is a viable option if your credit has dipped since you first obtained your loan,” says Bergeron.

Similarly, the VA IRRRL allows veterans to refinance without a credit check or extensive documentation, focusing instead on payment history.

“It’s designed to lower your interest rate or switch from an adjustable-rate to a fixed-rate mortgage, making it easier for veterans with poor credit to benefit from lower monthly payments,” Bergeron continues.

Additionally, the USDA Streamlined Assist program also doesn’t require a credit check, provided your existing USDA loan is in good standing.

“This program is available to existing USDA borrowers. It’s particularly beneficial for those in rural areas with less access to traditional refinancing options,” adds Bergeron.

If you still don’t have a sufficient credit score to qualify for these refinance programs, you may want to consider a non-qualified mortgage (non-QM) loan. This is a type of mortgage that doesn’t conform to the Consumer Financial Protection Bureau’s (CFPB) guidelines.

These loans are tailored for borrowers with non-traditional income or lower credit scores who don’t qualify for standard loans. Non-QM loans can be used for rate-and-term refinancing or cash-out refinancing.

“These loans consider alternative documentation, such as bank statements, to determine your ability to repay. While interest rates may be higher with a non-QM refinance loan, they offer a path forward for borrowers with bad credit,” Holman continues.

Or, try getting a friend or relative with better credit to co-sign your chosen mortgage refinance loan, which can improve your chances of getting approved. Just be aware that co-signers are legally responsible for the debt if you fail to make payments or default on the loan.

Tips for Raising Your Credit Score to Refinance

Fortunately, there are ways to increase your credit score before applying for a mortgage refinance. Here are the best practices recommended by the experts:

• Pay down your credit card balances. “Credit utilization, or the percentage of available credit you are using, has a significant impact on your score,” Holman says. “Aim to keep your utilization below 30%. If you can, paying down your balances to 10% or less will maximize your score improvement.”
• Review and correct your credit reports. Get a copy of your three free credit reports and review them thoroughly to identify any unknown issues. If you spot any errors or inaccuracies, dispute them with the three major credit bureaus. This can improve your score over time.
• Make timely payments. “Payment history accounts for 35% of your credit score, so ensuring that you consistently pay your bills on time is crucial,” recommends Holman. “Even one late payment can severely damage your score, so it’s vital to build a solid on-time payment history at least six months before you apply for a refinance. Automating payments can help ensure you never miss a due date.”
• Avoid new credit inquiries. “Refrain from applying for new credit in the months leading up to your refinance, as each credit inquiry can temporarily lower your score,” Shirshikov advises.
• Try secured credit cards. “Consider getting a secured credit card, especially if you are rebuilding credit. Make small purchases and pay them off on time and in full to build your credit history,” Spigelman says.
• Keep old accounts open. “The length of your credit history contributes to your credit score, so avoid closing older accounts even if you don’t use them,” Holman continues.
• Negotiate with creditors. If you are encountering difficulty, attempt negotiating payment plans with creditors to avoid negative marks on your credit.

The Bottom Line

Your credit score plays a big part in your ability to refinance and claim more affordable refi rates and terms. Check your score regularly and work to improve it by following proven tips and managing your finances responsibly.

“Refinancing is a powerful tool to manage your mortgage, but timing and preparation are everything,” says Shirshikov. “Work closely with a financial advisor or mortgage broker who can help you navigate the complexities of the process and ensure you’re making the best decisions based on your financial situation.”