What Is the Credit Score Needed to Refinance a House Loan?

Refinancing a house loan can reduce monthly payments, provide more equity or get you out of debt sooner. However, you will need a good credit score to refinance a house loan. Lenders have different requirements depending on the type of loan you want. You can get a refinance in most cases if you have a 620 FICO score or higher, but there are some options available for people who don’t have the best credit.

Credit Score Needed to Refinance a Mortgage

Conventional mortgages require a 620 credit score or higher, and that score is sufficient for most types of loans. You will need a higher credit score to get a jumbo loan refinance. Raising your credit score can also help you get more competitive rates and terms.

Homeowners can choose from two types of refinances: rate-and-term refinancing and cash-out refinancing. A rate-and-term refinancing does not change the loan amount but adjusts the interest rate and the duration of the loan. You can add closing costs to the back end of your loan.

A cash-out refinance involves pulling equity out of your home and using those funds for any purchase. You will also change the rate and terms of your existing mortgage. Most mortgage lenders have the same credit score requirement for both types of refinances. These are the current minimums.

Conventional Loans

Rate-and-term refinance minimum credit score: 620 

Cash-out refinance minimum credit score: 620 

Conventional mortgages are popular financial products that let you make a down payment as low as 3%. You need a 620 FICO score or higher to get one of these loans. While requirements vary for each lender, most will require a debt-to-income ratio below 45%. You also must show employment history and have a loan-to-value ratio below 80%.

FHA Loans

Rate-and-term refinance minimum credit score: 580 

Cash-out refinance minimum credit score: 580 

Loans backed by the Federal Housing Administration (FHA) are more accessible financial products. You only need a 580 credit score to get a refinance. You must also have a debt-to-income ratio below 43% and a good employment history. Applicants need at least 20% equity in their homes and no late mortgage payments during the last 12 months. FHA loans cater to people who want to live in their homes, so mortgage lenders will verify if you have resided in the house for the past 12 months.

VA Refinance

Rate-and-term refinance minimum credit score: 500 

Cash-out refinance minimum credit score: 500 

You can get Veterans Affairs (VA)-backed refinancing with a credit score as low as 500 from some lenders. However, you will typically need a 620 credit score or higher. The requirements vary for each lender, but you must provide your employment history, copies of your federal tax returns over the past two years, W-2 forms and additional information. Some loan providers give VA loans to homeowners with debt-to-income ratios as high as 41%.

USDA Refinance

Rate-and-term refinance minimum credit score: 620 

Cash-out refinance minimum credit score: 620

Refinancing backed by the U.S. Department of Agriculture (USDA) has similar requirements as other financial products. You need a 620 FICO score and a debt-to-income ratio that is 41% or lower. You will also have to provide proof of citizenship and employment history. USDA refinancing differs from other financial products because you must demonstrate that your income does not exceed 115% of the median household income in your area.

Jumbo Refinance

Rate-and-term refinance minimum credit score: 680

Cash-out refinance minimum credit score: 680 

Jumbo refinances are for properties that do not conform to the limits set by Fannie Mae and Freddie Mac. These loans have higher requirements, such as a 680 FICO score and a 43% debt-to-income (DTI) ratio or lower. Some lenders will not entertain DTI ratios above 38% and may require a second appraisal. You also need enough cash reserves to cover six to 18 months of mortgage payments. 

Can You Refinance Your Mortgage With a Bad Credit? 

It’s possible to refinance your mortgage even if you have a bad credit score. The FHA has loans available that only require a 580 credit score. You can also talk with your current lender if you are in good standing to get some assistance. Homeowners can also work with co-signers who have good credit. Banks will look at the co-signer’s credit profile and financials when reviewing your application.

How to Improve Your Credit Score

Improving your credit score is the best way to make refinancing more accessible. You’ll also get better rates and terms. These quick tips can put you on the right path to raising your credit.

• Make on-time payments
• Trim your existing debt
• Request a higher credit limit if you aren't going to apply for a refinance for several months
• Avoid hard credit checks a few months before you apply for a refinance
• Become an authorized user for a cardholder who pays everything on time

Compare the Best Mortgage Refinance Companies from Benzinga’s Top Providers

Consumers can choose from many mortgage lenders. These are some of the top choices to consider.

Getting a Good Rate and Term for Your Refinance

Raising your credit score will put you in a better position when it’s time to apply for a refinance. You can compare rates and terms from various lenders and financial products before choosing the right home loan for your financial situation. Building credit and improving your debt-to-income ratio are long-term objectives that can be very rewarding.

Frequently Asked Questions