What Credit Score Do I Need to Refinance My Mortgage?

Refinances, similar to purchase mortgages, have minimum credit score requirements. These requirements vary by lender and the type of refinance you’re pursuing. Read on to learn more about the minimum credit scores needed for different types of refinances, so you can prepare accordingly.

What credit score is needed to refinance a house?

The credit score needed to refinance depends on your mortgage lender, individual situation, and the type of refinance you choose (e.g., cash-out versus rate-and-term).

For instance, a conventional mortgage refinance is possible with a credit score of 620, while FHA refinances can typically be done with scores in the mid-500s. However, credit score minimums can vary widely with the general credit conditions in the residential mortgage market, according to Matt Hackett, mortgage operations manager at Equity Now in New York.

The type of refinance and your debt-to-income (DTI) ratio also influence the credit score required. “Typically, if you have a credit score between 620 and 639, you’ll need a DTI below 45 percent,” says Ben Allred, senior mortgage loan consultant with Waterstone Mortgage in Gilbert, Arizona. “However, if your FICO score isn’t strong, you might still get approved through a non-traditional credit program.”

Even with a lower DTI ratio, you may need to improve your credit score for special refinances, like a cash-out refinance.

Credit score for conventional refinance

Credit Score Minimum: 620

Conventional refinancing is one of the most common types of refinancing. To qualify, you’ll need a credit score of at least 620. At this score, you’ll likely need a debt-to-income (DTI) ratio of 36 percent or less, which can be restrictive. However, with a higher credit score, you may 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, which means they don’t have to adhere to the conforming credit score minimum of 620. However, because jumbo loans involve borrowing larger sums of money, the minimum credit score required to refinance into one is typically higher — often 700 or above.

Credit score for FHA refinance

Credit Score Minimum: 580

You can refinance an FHA loan with a minimum credit score of 580, the same requirement for obtaining the original loan. However, if you qualify for an FHA streamline refinance, you can bypass the credit score requirement entirely.

Credit score for VA refinance

Credit Score Minimum: No Requirement from VA, but Generally 620

The Department of Veterans Affairs (VA) does not set a minimum credit score requirement for the mortgages it backs, including refinances. However, most lenders typically require a credit score of at least 620 for a VA loan refinance.

Credit score for USDA refinance

Credit Score Minimum: No Requirement from USDA, but Generally 640

Similar to VA loans, USDA loans do not have a set minimum credit score requirement. However, many lenders typically require a credit score of at least 640 for USDA loan refinances.

Credit score for cash-out refinance

Credit Score Minimum: 620

For a cash-out refinance, the minimum credit score required is 620. However, having a higher credit score could allow you to access more funds, depending on the amount of equity you have in your home.

Can you refinance your mortgage with bad credit?

Refinancing your mortgage with bad credit is possible, but your options will be somewhat limited. Here are some programs to consider if you have a poor credit score:

FHA streamline refinance

For those with an FHA loan, an FHA streamline refinance is an option. This program doesn’t require a credit check or income verification, and usually, no home appraisal is needed. However, you must pay mortgage insurance premiums, which could offset any savings from refinancing.

VA interest rate reduction refinance loan (IRRRL)

Also known as a VA streamline refinance, an IRRRL is available to current VA loan holders. This no-credit-check loan doesn’t typically require income documentation or a home appraisal. You will need to pay the VA funding fee and closing costs, but these can be rolled into the loan.

USDA Streamlined Assist program

Current USDA loan holders who have made on-time payments for at least 12 months may qualify for this program. It generally doesn’t require an appraisal or credit check. To qualify, the refinance must 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 significantly strengthen your application. Here are a few strategies to help you do that:

• Address Your Credit Utilization Ratio: Aim to use less than 30 percent of your available credit by paying down debt. You can also request a credit limit increase, but only if you’re confident you won’t accumulate more debt.
• Pay Your Bills on Time: Maintain a period of no credit inquiries 90 to 120 days before applying for refinancing, as recommended by Hackett. Also, coordinate with a few lenders so their inquiries occur within a short timeframe, minimizing the impact on your score.
• Stay on Top of Your Credit Score: Regularly review your credit score for free at AnnualCreditReport.com. This will help you identify and correct any inaccuracies well before you need to apply for refinancing.

In Conclusion

Just like when you initially applied for your mortgage, there are minimum credit requirements for refinancing. While it may be more challenging to refinance with less-than-ideal credit, it is still possible.