What Credit Score Do You Need to Refinance Your Mortgage?

Most loan types require a minimum 620 credit score to refinance a mortgage, though the requirement may vary by loan program. Lenders tend to offer lower refinance interest rates to borrowers with higher credit scores. Getting your credit in top shape before refinancing is the best way to snag competitive rate offers.

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What’s the credit score needed to refinance your mortgage?

Your home 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 used to make debt payments.
• Your LTV ratio is the percentage of your home’s value being financed by your mortgage.
• Your mortgage refinance program will likely involve conventional, Federal Housing Administration (FHA), U.S. Department of Veterans Affairs (VA) or U.S. Department of Agriculture (USDA) refinancing options in most cases.

Rate-and-term refinance minimum credit scores

CONVENTIONAL LOANS

Minimum credit score needed: 620 to 720

A rate-and-term refinance is considered a “traditional” refinance and is often used to change your repayment term or lower your mortgage rate. 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:

• The minimum credit score is 680 if your LTV ratio is above 75% with a maximum 36% DTI ratio. The credit score minimum jumps to 720 if you have a maximum 45% DTI ratio.
• The minimum credit score is 640 for borrowers with an LTV ratio below or equal to 75% and a maximum 36% DTI ratio. If you have a maximum 45% DTI ratio, you’ll need at least a 680 credit score.

Your lender may require proof you have 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 above 80% at the time of your refinance, you may be charged for private mortgage insurance (PMI).

FHA LOANS

Minimum credit score needed: 500 to 580

Your LTV ratio determines the minimum credit score required for a rate-and-term refinance on an FHA loan, a mortgage backed by the Federal Housing Administration:

• 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 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 is no mortgage insurance requirement.

USDA LOANS

Minimum credit score needed: No minimum, but lenders usually require 640

The USDA backs refinances for borrowers with current USDA loans. Borrowers may be able to refinance up to 100% of their home’s value and roll closing costs into the loan. A 640 score is the benchmark for a “streamline” loan process, but lenders may review lower scores on a case-by-case basis.

Cash-out refinance minimum credit scores

CONVENTIONAL LOANS

Minimum credit score needed: 660 to 700

A cash-out refinance allows you to borrow a new loan for more than you owe on your current mortgage and take the difference between the two loans in cash. The credit scores needed for a cash-out refi on a single-family home with a conventional loan vary based on DTI and LTV ratios:

• The minimum credit score is 680 for borrowers with an LTV ratio above 75% and a maximum 36% DTI ratio. If your DTI ratio is above 36% and up to 45%, you’ll need a 700 credit score.
• The minimum credit score is 660 for borrowers with an LTV at or below 75% and a 36% maximum DTI ratio. The score minimum is 680 if you’re at the maximum 45% DTI ratio.

The maximum LTV ratio allowed on a conventional cash-out refinance is 80%, which means you need at least 20% equity. You’ll also pay closing costs and fees.

FHA LOANS

Minimum credit score needed: 500

Requirements for an FHA cash-out refinance are more lenient than they are for conventional cash-out refinance loans. The minimum credit score is 500, with a maximum 80% LTV ratio. You’ll pay FHA closing costs and FHA mortgage insurance for a cash-out refi.

VA LOANS

Minimum credit score needed: No minimum, but lenders typically require 620

There is no minimum credit score for a VA cash-out refinance, but many lenders require at least a 620 credit score. The maximum allowed LTV ratio is 90%, which gives you more borrowing power than FHA and conventional cash-out refinances. Standard closing costs and fees also apply to this type of VA loan.

USDA LOANS

The USDA doesn’t allow cash-out refinancing.

Can you refinance with bad credit?

You can refinance with bad credit or no credit, in some cases. Here are a few loan programs for credit-challenged homeowners:

Streamline refinance requirements

FHA STREAMLINE REFINANCE

The FHA streamline refinance may not require a full credit check for borrowers with a current FHA mortgage. 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, 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.

High-LTV refinance requirements

Fannie Mae and Freddie Mac, the two major government-sponsored enterprises, offer refinance programs for borrowers with high LTV ratios or even 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.

How to boost your credit score before refinancing

Do everything possible to get your credit score in shape before you refinance your mortgage. The following tips can help you get there.

Keep track of your credit score.

Knowing your credit score will help you determine if you’re eligible to refinance, and checking your credit score won’t hurt your credit. Remember, you don’t need a perfect credit score for a mortgage refi.

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.

Make all payments on time.

Your payment history makes up 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.

Avoid closing accounts.

Closing old credit accounts may actually hurt your credit scores. 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.

Pay down non-mortgage debt.

Your credit utilization ratio, which is the percentage of the credit you’re using relative to your available credit, also has a big impact on your credit scores. Paying down each credit card balance to well below 30% of your available credit can improve your credit utilization ratio and credit score. Aim for 10% utilization or lower, if you can. For installment debts like auto, personal or student loans, make extra payments to shrink your balances sooner.

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.