What Credit Score Do You Need to Refinance a Mortgage?

What Credit Score Is Needed to Refinance a House?

The credit score requirements for a home refinance will depend on the type of loan. Keep in mind that you might benefit from refinancing your mortgage with a different type of loan. For example, if you have an FHA loan, refinancing with a conventional loan might require a higher credit score, but it will also help you get rid of your private mortgage insurance.

Here's a closer look at the minimum score requirements for common types of mortgages

Conventional Loan Credit Requirements

You generally need a credit score of 620 or higher to qualify for a conventional mortgage loan, but some lenders might require a higher score. Even if it's not a requirement, a higher credit score can help you qualify for a better interest rate.

FHA Loan Credit Requirements

Federal Housing Administration (FHA) loans offer several types of refinancing, including simple, cash-out and streamline loans. The minimum credit score might be 500 or 580, depending on the type of refinancing and your other qualifications, such as how much equity you have in the home. If you're eligible, you can get a non-credit-qualifying FHA streamline refinance loan that doesn't require an appraisal or a credit check.

USDA Loan Credit Requirements

Similar to FHA loans, the U.S. Department of Agriculture (USDA) loan programs offer several refinancing options, including a non-credit-qualifying streamline refinance. However, you might need a credit score of at least 580 to refinance into some USDA loans.

VA Loan Credit Requirements

You can refinance a Veterans Affairs (VA) home loan with a VA interest rate reduction refinancing loan (IRRRL) or a cash-out loan. The VA itself doesn't have minimum credit score requirements, but VA lenders often require you to have a credit score of 620 or higher.

Jumbo Loan Credit Requirements

Jumbo loans tend to be riskier for lenders due to their large balances. As a result, you may need a credit score of 680 or higher to refinance your mortgage. If you can afford to put additional money down, you might qualify for a non-jumbo conventional loan with a lower credit score.

What Other Factors Affect Refinance Approval?

In addition to your credit score, lenders will generally consider many of the factors they look at when you want to buy a home. These can include your:

• Debt-to-income ratio (DTI): The lender will compare your monthly debt payments, including the new mortgage, to your monthly income to determine your DTI. A lower DTI is best, and under 31% is a good rule of thumb, especially for FHA loans. But you might qualify with a higher DTI, such as 50% or even 65%, with certain types of refinance loans or if you meet other financial requirements.
• Home equity: How much equity you have in the home is also a factor. If you're getting a cash-out refinance, which will reduce your equity, the equity you've built and your home's current value could impact the maximum amount of cash you can borrow.
• The home's value: The lender may want to appraise the home to determine its current value. If the value increased and you don't do a cash-out refi, it may be easier to qualify for a new mortgage with a favorable interest rate because your loan-to-value (LTV) ratio will decrease.
• Income and employment history: The lender will want to make sure you can afford your new mortgage payment. It may also consider your employment history, especially if you recently started a new job.
• Payment history on the existing loan: Refinancing your mortgage may be more difficult if you previously missed payments or are currently past due.

Learn more: How Does Refinancing a Mortgage Work?

Can You Refinance With Bad Credit?

You may be able to refinance your mortgage even if you have bad credit, but you'll have fewer options and won't receive the best interest rate. Still, refinancing might be a way to lower your interest rate or monthly payment.

Here are four options to consider:

• Ask your current lender: If you have a history of making your mortgage payments on time, you can ask your lender about refinancing options and see if they'll work with you in spite of your credit score.
• FannieMae RefiNow^™: The FannieMae RefiNow mortgage doesn't have a minimum credit score requirement, and you can qualify with a DTI of up to 65%. However, you must meet other requirements. For example, your income can't be above the area's median income, and you can't have missed a payment in the last six months.
• Streamlined government-backed refinancing: If you have a government-backed mortgage, such as an FHA or USDA loan, you might qualify for streamlined refinancing without a credit check.
• Refinance with a co-borrower or cosigner: Adding a creditworthy co-borrower or cosigner might help you qualify for a new loan. However, considering the potential complications, this might only be an option with a family member or significant other.

Learn more: When Should You Refinance Your Mortgage?

How to Improve Your Credit Score for a Refinance

There are many potential ways to improve your credit scores as you prepare to refinance your mortgage. The specific options, and how much they'll help, will depend on your current credit history and score. However, some good places to start are:

• Pay bills on time. On-time payments can help your credit scores over time, and one late payment can do a lot of damage. Set reminders and alerts, or use autopay, to avoid accidentally missing due dates. And reach out to your creditors if you think you'll have trouble affording a payment.
• Pay down credit card balances. Paying down credit card balances can lower your credit utilization ratio, which can be a quick way to improve your credit scores if you currently have a high utilization rate. Even if you already pay your bill in full each month, paying down the balance early might still improve your credit scores.
• Use different types of credit. You already have a mortgage, which is a type of installment loan. But if you don't have a credit card, getting a card could add an open revolving account to your credit report. Having this mix of account types in your credit report might help your scores.

Also, learn how applying for a new mortgage, including refinancing, might affect your credit scores. A strategic approach, such as grouping your refinancing preapprovals into a two-week window, can help you limit the potential damage to your scores when you're shopping for a new loan.

The Bottom Line

You typically need a minimum credit score of 620 to refinance your mortgage. However, some loan programs and lenders may approve you with a lower score, and some types of refinancing don't require a credit check or home appraisal.

Still, improving your credit is important because a higher score might help you qualify for more offers and a lower interest rate. A high credit score can also help you get better terms on other types of loans. And, in many states, better credit can lead to lower homeowners insurance premiums.

Tracking your credit can also be helpful, especially when you're considering refinancing. You can check your credit report and FICO^® Score for free from Experian and receive alerts when there are important changes to your credit.