What credit score is needed to refinance your mortgage?
Key takeaways
- You’ll need a credit score of at least 620 for a conventional refinance.
- Credit score minimums for other types of refinances range from 580 to 700 or higher.
Refinances, like purchase mortgages, come with minimum credit score requirements. The specific requirements vary depending on your lender and the kind of refinance you want. Read on to learn more about the minimum credit score for refinances.
What credit score is needed to refinance a house?
| Loan type | Minimum score |
|---|---|
| Conventional refinance | 620 |
| Jumbo refinance | Generally 700 or higher |
| FHA refinance | 580 |
| VA refinance | No credit minimum from VA, but generally 620 |
| USDA refinance | No credit minimum from USDA, but generally 640 |
| Cash-out refinance | 620 |
These numbers are guidelines, but the credit score you need to refinance depends on your mortgage lender, your individual situation and often, the type of refinance you choose. For example, lenders tend to have more stringent requirements for borrowers doing a cash-out refi versus a traditional rate-and-term refinance.
You might also find your lender prefers a higher score if other aspects of your financial picture aren’t as strong as they might be, for instance, if you have a high debt-to-income (DTI) ratio.
Credit score for conventional refinance
Credit score minimum: 620
Conventional refinancing is one of the most common types. You’ll need at least a 620 credit score to refinance your conventional loan or to refinance into a conventional loan — though at that score, you’ll likely need a DTI ratio of 36 percent or less, which can be limiting. If you have a higher credit score, you might be able to refinance with a higher DTI ratio.
Credit score for jumbo refinance
Credit score minimum: Generally 700 or higher
Jumbo loans are a type of non-conforming loan, so they don’t have to adhere to all the same requirements as a conforming loan. However, because jumbo loans are so large, you’ll typically need a higher minimum credit score to refinance into one — often 700 or above.
Credit score for FHA refinance
Credit score minimum: 580
You can refinance an FHA loan with a credit score of at least 580. However, if you qualify for an FHA streamline refinance, you’ll be able to bypass this requirement entirely.
Credit score for VA refinance
Credit score minimum: No requirement from VA, but generally 620
The Department of Veterans Affairs (VA) doesn’t set a minimum credit score requirement for the mortgages it backs, including refinances. However, many lenders do require at least a 620 for a VA loan refinance.
Credit score for USDA refinance
Credit score minimum: No requirement from USDA, but generally 640
Like the VA loan program, USDA loans don’t have a set minimum credit score requirement. Still, many lenders require at least 640.
Credit score for cash-out refinance
Credit score minimum: 620
The lowest credit score you can have for a cash-out refinance is 620. With a higher score, you might be able to cash out more, depending on your existing equity level.
Other factors that affect refinance approval
Your credit score isn’t the only factor lenders will consider when reviewing your application to refinance. As when you applied for your original mortgage, lenders will also review your:
- DTI ratio: If your credit score is strong, you may have more wiggle room to carry a higher-than-ideal debt load. If your credit score is closer to 620, you’ll have less flexibility.
- Loan-to-value (LTV) ratio: Your LTV ratio is a measure of the amount of your mortgage you’ve paid off. To refinance, most lenders will require you have at least 20 percent equity in your home.
- Income and work history: Lenders prefer you to have worked in the same job — or at least in the same industry — for two years and show reliable income.
Can you refinance your mortgage with bad credit?
It’s possible to refinance your mortgage with bad credit, but your options will be somewhat limited. Here are some programs to consider if you’re hoping to refinance with a poor credit score.
FHA streamline refinance
If you want to refinance an FHA loan, you can look into an FHA streamline refinance, which doesn’t require a credit check, income verification, or, typically, a home appraisal. However, you will have to pay mortgage insurance premiums. Make sure this won’t cancel out what you’ll save by refinancing.
VA interest rate reduction refinance loan (IRRRL)
Also known as a VA streamline refinance, an IRRRL is a no-credit-check loan available to current VA loan holders. With this type of refinance, you usually don’t have to submit any income documentation or undergo a home appraisal. You’ll still need to pay the VA funding fee and closing costs, but they can be rolled into the loan.
USDA Streamlined Assist program
If you’re a current USDA loan holder who has made on-time payments for at least 12 months, you could apply for a refinance through this program. Lenders typically don’t require an appraisal or credit check, but to qualify, the loan will need to reduce your principal, interest, taxes and homeowners insurance (PITI) payments by at least $50 per month.
How to improve your credit score for a refinance
Improving your credit score before refinancing can go a long way toward making your application stronger. To do that, you can:
- Address your credit utilization ratio. Focus on paying down debt so that you’re using less than 30 percent of your available credit. You could also request a credit limit increase — as long as you’re sure you won’t run up a balance.
- Pay your bills on time. As you prepare to refinance, try to avoid applying for new credit. You can also submit all your refinance applications within a month or so to reduce the impact on your credit.
- Stay on top of your credit score. You can review your credit score for free at AnnualCreditReport.com. By keeping tabs on your score, you’ll be able to correct any inaccurate information well before you need to apply for any loan, including a refinance.
