Thinking of refinancing your mortgage? Here’s the credit score you’ll need


Our goal at Credible Operations, Inc., NMLS Number 1681276, hereafter referred to as “Credible”, is to give you the tools and confidence you need to improve your finances. Although we promote the products of our partner lenders who pay us for our services, all opinions are our own.

The credit score you need to refinance a mortgage depends on the type of refinance you are applying for. (iStock)

Whenever you apply for a credit-based account, whether it’s a credit card or a mortgage refinance loan, your credit score will be an important factor. Lenders use credit scores to help determine the likelihood of you paying off your debt as scheduled when deciding whether or not to lend.

Your credit score can affect not only your loan approval, but also the loan terms and interest rate you are offered. Here is an overview of the importance of your credit score when refinancing a mortgage.

You can use Credible to compare mortgage refinance rates from various lenders in minutes.

What credit rating do I need to refinance a home?

Knowing the exact credit score you need to refinance a home can be tricky because there is no single score threshold.

Credit score requirements can vary depending on the type of loan you take out and even the individual lender. Factors like your loan-to-value ratio, and even the type of home you own, can also alter your credit score requirements.

In general, here are the credit score requirements for each type of mortgage refinance:

  • Conventional mortgage loan (with collection and rate and term): 620 to 720
  • FHA loan (including collection and rate and term): 500 if the LTV ratio is 90% or less; 580 if the LTV ratio is greater than 90%
  • FHA Loan (Streamlined): No minimum credit score required
  • VA loan (IRRRL and cash-out): No minimum credit score required
  • USDA Loan: No minimum credit score required, but must demonstrate ability to manage debt

It is important to note that just because a particular type of loan has specific credit score minimums or no requirement at all does not mean that you will automatically be approved if your score meets that requirement. Other personal factors, such as the LTV ratio of your new loan, your payment history, and your debt-to-income ratio, may require you to have a higher credit score to qualify.

FHA (rate and term and collection)

FHA cash-in refinance and rate and term refinance loans are issued by third-party lenders but are FHA-insured, which generally means lower credit score requirements.

For an FHA rate and term refinance, you will need a credit score of at least 500 if the LTV ratio of your new loan will be 90% or less, according to FHA guidelines. If the LTV ratio of your new loan is over 90%, you will need a credit score of at least 580. For FHA refinance loans, homeowners are limited to an LTV ratio of 80% or less. They must also have a credit score of at least 580 to qualify.

Also keep in mind that individual lenders may require higher credit scores than the basic FHA loan minimum.

FHA (streamline)

FHA Streamlined Refinance Loans are only available to borrowers with an existing FHA-backed mortgage. These loans are usually fast, require less paperwork, and usually don’t require a home appraisal.

A streamlined FHA refinance has a maximum LTV ratio of 97.75% with an appraisal; there is no upper limit of LTV ratio without rating.

Conventional (rate and duration and collection)

A conventional rate and term mortgage refinance allows you to change the interest rate, term, monthly payment amount of your loan, or all three. A variety of banks and lenders offer these loans, so it makes sense to shop around to find the best terms for you and your credit score.

Conventional lenders can set their own credit score requirements. On average, the minimum credit score for a conventional refi loan ranges from 620 to 720. The credit score required to refinance will depend on factors such as your home equity, payment history, income, debts and even your current cash.

If your LTV ratio is less than 75%, your debt-to-income ratio (DTI) is less than 36%, or you have at least two months of spending in savings, you may qualify for a refinance with a lower credit score . Borrowers with a higher DTI ratio, higher LTV ratio, or less money in savings can generally expect a higher credit score requirement.

Credible allows you compare mortgage refinance rates without affecting your credit score.

VA (IRRRL and withdrawal)

VA refinance loans have no minimum credit score requirement. Whether you are looking for an Interest Rate Reduction Refinance Loan (IRRRL) or a VA cash-out refi, VA-backed mortgages require the lender to look at the overall financial profile of the borrower instead of just his credit rating.

That said, some lenders may still have their own minimum credit scores that you’ll need to meet to qualify for a refinance loan.


Borrowers can choose from three USDA refinance loan options: non-streamlined, streamlined, and streamlined. Each has its own requirements regarding appraisals, maximum loan amounts and credit scores.

With a USDA non-streamlined or streamlined refinance loan, borrowers are subject to a full credit review. They will also need to show that their existing loan has been paid as agreed for at least 180 days prior to the refi request.

A simplified refinance of an existing USDA loan does not require a credit check and there is no specific minimum credit score. But lenders will consider other aspects of the borrower’s financial profile, such as mortgage payment history in the 12 months prior to application.

Can I refinance a mortgage with bad credit?

A good credit score can open many financial doors, while a bad credit score can limit your options when it comes to any credit-based product. This is especially true with a home loan. It is possible to refinance a mortgage with bad credit, but it might be a little more difficult.

First, let’s define “bad credit” as it relates to a lender. Although there are many credit scoring models – such as the FICO and VantageScore models – the most commonly used model is the FICO 8.

FICO 8 credit scores range from 300 to 850, with a score of 579 or lower falling into the poor category. If your score falls below 579, you may have a harder time getting the type of refinance loan or interest rate you want.

If you have bad credit, you may also not be eligible for certain types of refinance loans. If you are eligible, you will need to meet specific lender guidelines such as maximum LTV limits, have a positive payment history, or hold a certain amount in liquid savings. These can help offset your perceived risk to a lender, making it easier for them to approve your loan application.

In some cases, you may need to improve your credit score first to refinance your home loan, especially if you want a more competitive interest rate. You may also be able to qualify by offering a larger down payment on the new loan or by applying with a co-borrower with good or excellent credit.

How to get the best refinance rate

Getting the best possible interest rate on your refinance loan can help you lower your monthly payments, lower your overall finance charges, get out of debt sooner, or accomplish all three. But how exactly do you go about finding the best interest rate when refinancing?

Here are some things to consider when looking for the most competitive rate for your situation:

  • Improve your credit score. The better your credit score, the more competitive your refi loan options will be. This is because lenders consider borrowers to be less risky if they have an excellent credit history. Consider pulling your own credit reports from each of the three major credit bureaus (Equifax, Experian, and TransUnion) to check for any errors and see where you can make improvements before applying for a refinance loan.
  • Reduce your overall debt burden. Your DTI ratio and credit utilization also pose a risk to a lender. The higher these numbers, the higher your interest rate is likely to be. By paying off balances, such as credit cards or student loans, you reduce your overall debt load and increase your chances of getting a lower rate.
  • Comparison store for lenders. When buying a car or a house, you usually don’t look at a single one before making the leap. Finding a refi lender should be the same way. It’s wise to shop around to see what rates a variety of lenders will offer you. Using a platform like Credible can be an easy way to shop multiple lenders in one place.
  • Add a co-borrower. By adding a co-borrower with good or excellent credit to your refinance loan, you’re more likely to get lower interest rates. Just make sure the co-borrower is someone you want to co-own your home with, and make sure they understand the financial obligation involved.

If you’re ready to refinance, use Credible to compare mortgage refinance rates from various lenders to find the right one for you.

When should I refinance my mortgage?

Deciding when to refinance your mortgage depends on a number of personal factors, and the answer will be different for every homeowner.

In general, refinancing may make sense if:

  • You want to reduce your monthly mortgage payment.
  • Market interest rates have gone down since you bought your house.
  • You pay for private mortgage insurance (PMI) on your home, but you now have enough equity (either due to principal repayment or an increase in the value of your home) to remove the PMI.
  • Your credit score has improved since taking out your original loan.
  • You can refinance at a lower rate without extending the term of your loan.
  • You’ll save more in interest than the refinance loan costs in closing costs.

Refinancing can be quite a complex process. But it can be a wise financial decision for many homeowners, especially if they meet certain personal and credit score requirements.


About Author

Comments are closed.