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 to do. Read on to learn more about the minimum credit score for refinances, so you can prepare accordingly based on your loan type.
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 |
The credit score you need to refinance depends on the mortgage lender you work with, your individual situation and often the type of refinance you choose (for example, cash-out versus rate-and-term).
It’s possible to do a conventional mortgage refinance with a credit score of 620, and FHA refinances are typically doable for those with credit scores in the mid-500s.
However, “credit score minimums vary widely with the general credit conditions in the residential mortgage market,” says Matt Hackett, mortgage operations manager at Equity Now, a direct lender based in New York.
The type of refinance you do, as well as your debt-to-income (DTI) ratio, can also influence how high of a credit score you need.
“Typically, if you have between a 620 and a 639 credit score, you’re going to need a DTI below 45 percent,” says Ben Allred, senior mortgage loan consultant with Waterstone Mortgage in Gilbert, Arizona. “However, if you don’t have a good FICO score, you might be able to get approved through a non-traditional credit program.”
Even with a lower DTI ratio, you might end up needing to improve your credit score if you want to do a special type of refinance, such as a cash-out refi.
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 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 many requirements, including the conforming credit score minimum of 620. Because you’re taking out much more money with a jumbo loan, however, the minimum credit score needed to refinance into one of these loans is higher — often 700 or above.
Credit score for FHA refinance
Credit score minimum: 580
You can refinance an FHA loan with the same minimum credit score you needed to get one: 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, not every lender is willing to do a VA loan refinance without accounting for credit score, and they often require at least 620.
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.
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 or income verification. Typically, no home appraisal is required, either. The downside of this type of loan, though, is a requirement to pay mortgage insurance premiums. Make sure this won’t negate any savings you hope to realize 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 refinance
Improving your credit score before refinancing can go a long way toward making your application stronger. Here are a few ways to do that:
- Address your credit utilization ratio. Focus on paying down debt so that you’re using less than 30 percent of your available credit, say Allred and Hackett. 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 for refinancing, Hackett recommends a quiet period with no credit inquiries in the 90 to 120 days before applying. He also suggests having a few lenders lined up so the inquiries they generate all happen within a short time frame, reducing the hit to your score.
- 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.
Bottom line
Just as when you first applied for your mortgage, there are minimum credit requirements to refinance it. If your credit needs work, refinancing your mortgage can be more challenging, but not impossible.
