Credit Score to Refinance Your Home: Requirements by Loan Type
Most lenders require a 620 minimum credit score to refinance a home loan, though the requirements vary by loan program. Lenders tend to offer lower refinance interest rates to borrowers with higher credit scores. Getting your credit in shape before refinancing is the best way to snag competitive rate offers.
Key takeaways
- You’ll generally need at least a 620 credit score to refinance your mortgage.
- You can still refinance with bad credit, but your options will be limited.
- Credit score requirements vary between rate-and-term and cash-out refinance loans.
What credit score is needed to refinance a home?
| Loan type | Minimum credit score |
|---|---|
| Conventional loan | 620 to 720 |
| FHA loan | 500 to 580 |
| VA loan | 620 |
| USDA loan | 640 |
Your mortgage refinance eligibility depends on your credit score and three other factors: your debt-to-income (DTI) ratio, your loan-to-value (LTV) ratio and your chosen refinance program.
→ Your DTI ratio is the percentage of your gross monthly income that goes toward debt payments.
→ Your LTV ratio is the percentage of your home’s value being financed by your mortgage.
→ Your refinancing options will likely involve working with a conventional lender, or one that’s approved through the Federal Housing Administration (FHA), U.S. Department of Veterans Affairs (VA) or U.S. Department of Agriculture (USDA).
Refinance credit score requirements by loan type
Here are the credit score requirements for a rate-and-term refinance (traditional refinance), organized by loan type.
Conventional loans
Minimum credit score needed: 620 to 720
When refinancing a single-family home, the minimum credit score is generally 620. However, depending on your DTI and LTV ratios, you may need a higher score to refinance a conventional loan. For example:
- You’ll need a minimum 680 credit score if your LTV ratio is above 75% and you have a maximum 36% DTI ratio. The credit score minimum jumps to 720 if you have up to a 45% DTI ratio.
- You’ll need a minimum 640 credit score if your LTV ratio is below or equal to 75%, and you have a maximum 36% DTI ratio. If you have up to a maximum 45% DTI ratio, you’ll need at least a 680 credit score.
Your lender may require proof of mortgage reserves ranging from two to six months’ worth of expenses if your credit score is between 620 and 700. You’ll also pay for refinance closing costs ranging between 2% and 6% of your loan amount. If your LTV ratio is higher than 80% when you refinance, you may also have to pay for private mortgage insurance (PMI).
Ready to compare refinance offers? Get Your Best Rates from Top Lenders TodayFHA loans
Minimum credit score needed: 500 to 580
Your LTV ratio determines your minimum credit score requirement for a rate-and-term refinance on an FHA loan:
- The minimum credit score is 580 for borrowers with a maximum 97.75% LTV ratio.
- The minimum credit score is 500 for borrowers with a maximum 90% LTV ratio.
Besides standard FHA closing costs, you’ll pay upfront and annual FHA mortgage insurance premiums.
VA loans
Minimum credit score needed: No minimum, but lenders typically require 620
The VA doesn’t set a minimum credit score for rate-and-term refinances, but lenders often require a minimum 620 score. The VA only offers VA loans to borrowers serving or retired from the military or their surviving spouses.
Eligible VA borrowers can finance up to 100% of their home’s value with a rate-and-term refinance. VA closing costs may include a VA funding fee, but there’s no mortgage insurance requirement.
USDA loans
Minimum credit score needed: No minimum, but lenders typically require 640
The USDA backs refinances for borrowers with current USDA loans. Borrowers can refinance up to 100% of their home’s value and roll closing costs into the loan. A 640 score is the benchmark for a rate-and-term refinance, but lenders may review lower scores on a case-by-case basis.
What is a FICO credit score?
A FICO Score is a credit score created by the Fair Isaac Corp. and ranges from 300 to 850. While there are many different credit-scoring models, including the VantageScore, most lenders commonly use FICO Scores. For example, Fannie Mae requires FICO Scores as part of its mortgage underwriting process, in most cases.
Cash-out refinance credit score requirements
A cash-out refinance allows you to borrow a new mortgage for more than you owe on your current loan and pocket the difference between the two loans in cash. The credit score you’ll need for a cash-out refinance depends on your chosen loan program.
| Loan program | Minimum credit score |
|---|---|
| Conventional cash-out refinance | 640 to 700 |
| FHA cash-out refinance | 500 |
| VA cash-out refinance | No minimum, but lenders typically require 620 |
| USDA cash-out refinance | Cash-out refinancing isn't allowed |
Most lenders have an 80% LTV limit for cash-out refinances. However, VA lenders allow qualified borrowers to refinance with an LTV ratio up to 90% in most cases.
Can you refinance with bad credit?
You can refinance with bad credit or no credit, in some cases. If your credit score is on the lower side, here are a few loan programs to consider:
FHA streamline refinance
The FHA streamline refinance may not require a full credit check for existing FHA borrowers. You won’t need income documents, and there’s no home appraisal requirement. Closing costs are lower than a standard refinance.
VA interest rate reduction refinance loan
The VA’s interest rate reduction refinance loan (IRRRL) is a streamline refinance program with no credit score requirement for existing VA borrowers. Like the FHA streamline, you won’t need to provide income documentation or pay for an appraisal. You’ll still be responsible for closing costs, though, including a VA funding fee equal to 0.5% of your loan amount (unless you’re exempt from the VA funding fee).
USDA streamlined assist refinance
The USDA streamlined assist refinance program is reserved for current USDA borrowers. Lenders won’t require a credit review and, in most cases, there’s no appraisal requirement.
Can you refinance if you’re underwater on your mortgage?
Fannie Mae and Freddie Mac, the two major government-sponsored enterprises, offer refinance programs for borrowers with underwater mortgages. A house is considered “underwater” if the mortgage balance is higher than the home’s value. A high LTV ratio is considered 97.01% or higher. There’s no minimum required credit score to refinance under either program, but you must currently have a Fannie Mae- or Freddie Mac-owned mortgage to qualify.
Important note: Due to low demand, both Fannie Mae and Freddie Mac have temporarily paused their high LTV refinance options.
Use our refinance calculator to estimate when you can refinance your home loan.
How to boost your credit score before refinancing
Getting your credit score in shape before refinancing your mortgage can increase your approval odds. Here are some steps to help improve your credit score.
1. Keep track of your credit score
It can be challenging to make a plan to fix your credit without understanding your credit score and what’s in your credit report. Knowing your credit score will help you determine if you’re eligible to refinance. It can also identify what improvements you should make to increase it.
Don’t know your credit score? Get your free score on LendingTree Spring today.
2. Dispute credit report errors
Check your credit report for accounts you don’t recognize. Dispute inaccurate or false data with any of the three major credit bureaus — Equifax, Experian and TransUnion.
3. Make all payments on time
Your payment history accounts for 35% of your credit score. Making on-time payments on all of your credit accounts is the most important thing you can do to boost your score.
4. Avoid closing accounts
Closing old credit accounts can hurt your credit score. Even if you’re not using old credit cards, keeping those accounts open will help the “credit history length” component of your score rating, which accounts for 15% of your score.
5. Pay down nonmortgage debt
Your credit utilization ratio — the percentage of the credit you’re using relative to your available credit — also has a big impact on your credit score. Paying down your credit card balances to below 30% of your available credit can improve your credit score. For installment debts like auto, personal or student loans, make extra payments to shrink your balances sooner.
6. Don’t open any new accounts
New credit inquiries can hurt your credit score. Plus, too much new debt makes you a higher-risk borrower in the eyes of mortgage lenders. Wait until after your mortgage refinance is complete before opening new credit accounts.
Frequently asked questions
Refinancing your mortgage might be worth considering in the following situations:
→ It would lower your interest rate
→ It would lower your monthly mortgage payments
→ You could reduce or get rid of your mortgage insurance
→ You want to switch from an adjustable-rate mortgage to a fixed-rate loan, or vice versa
→ You don’t plan on moving for several years
Calculating the break-even point on your refinance can help you figure out if refinancing is the right option for you.
You might be able to refinance your mortgage with a 600 credit score, but your options will be more limited. The FHA allows qualified borrowers to refinance with a score as low as 500 and a maximum 80% LTV ratio.
Income requirements for refinancing aren’t one-size-fits-all — they vary depending on the lender and type of loan. You should be ready to hand over proof of income documents, including W-2s, bank statements, pay stubs and tax returns.