Your credit score plays a big role in your ability to qualify for a mortgage, as well as how much it will cost you.
And refinancing is no different.
When you refinance your existing mortgage, your credit score will influence the interest rate you can secure. Typically, borrowers with higher credit scores receive lower rates, while those with lower scores get higher rates.
What credit score do you need to refinance a home?
The exact credit score you’ll need to refinance your mortgage depends on the type of loan, as well as your specific lender’s requirements. In many cases, your loan-to-value ratio (the amount of financing you need versus the home’s value), will also determine what credit score you’ll need to qualify.
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Keep in mind that these are minimum credit scores for the loan programs. Lenders that offer these loans might require a higher credit score to lessen the risk.
Find Out: Does Refinancing Your Mortgage Hurt Your Credit? Here's the Truth
Conventional loan
With conventional loans, you can do a rate-and-term refinance, which changes your interest rate, term length, or both. You can also opt for a cash-out refinance. Cash-out refinancing lets you borrow more than you currently owe and take out cash to remodel your home, pay for repairs, or handle any other expense you might be dealing with. The numbers below assume a refinance on a primary residence.
Learn More:
- Complete Checklist of Mortgage Refinancing Requirements
- What Documents Do You Need to Refinance Your Mortgage? A Checklist
Rate-and-term refinance
Credit score: 620 to 720
A rate-and-term refinance for a conventional mortgage loan typically requires at least a 620 credit score — that is, as long as your loan-to-value ratio is 75% or less, you have at least two months of cash reserves in the bank, and your debt-to-income ratio is under 36%.
If you have a higher DTI or LTV or no cash reserves, credit score requirements increase, up to 720. The maximum LTV on a conventional refinance is 95%.
Cash-out refinance
Credit score: 640 to 700
On a cash-out conventional refinance, you’ll need a 640 credit score at minimum. To qualify with a 640, you will need a loan-to-value ratio of 75% or less, at least six months in cash reserves, and a debt-to-income ratio of 36% or lower.
Credit score requirements go up to 700 if your DTI or LTV is higher, or you have less in cash reserves. The maximum LTV on a conventional cash-out refinance is 80%.
FHA loans
FHA loans come with three refinance options:
- Streamline refinance
- Rate-and-term refinance
- Cash-out refinance
The streamline refinance requires less documentation than other refinancing options and is generally a quicker process. An FHA loan can be a good option if you’re looking for a no-closing-cost refinance.
FHA streamline refinance
Credit score: 500 to 580
FHA streamline refinances are designed to have a faster, less stringent qualifying process. Because of this, there is no credit check and no minimum credit score required — at least officially. Lenders may require a credit pull if they deem it necessary. Your loan-to-value ratio must be below 97.75% to qualify.
Learn: When to Refinance a Mortgage: Is Now The Best Time?
FHA rate and term refinance
Credit score: 500 to 580
As long as your new loan-to-value ratio is 90% or lower, you’ll only need a 500 credit score to qualify for an FHA refinance. If it’s higher than this, a 580 score is required.
Keep in mind these are just the minimums set out by the Department of Housing and Urban Development. Individual lenders can set score minimums higher than this (and typically do). A home appraisal may or may not be required on these loans.
FHA cash-out refinance
Credit score: 500 to 580
The U.S. Department of Housing and Urban Development has the same credit score minimums across all loan products, so an FHA cash-out refinance will require a 500 to 580, too. Though again, this can vary by lender.
With these loans, the maximum loan-to-value ratio is 95% as long as you’ve had the home for at least 12 months. If you’ve owned the property less than that, you’re limited to an 85% LTV.
VA loans
Homeowners with VA loans can choose from either an interest rate reduction refinance loan (IRRRL) or a cash-out refinance. Neither one has a minimum credit score required by the Department of Veterans Affairs. Individual lenders, however, may set their own requirements. You will also need to meet the VA’s military service requirements for these loans.
VA IRRRL
Credit score: No official minimum
This is similar to the FHA’s streamline refinance, as it’s designed to be a quick and painless way to refinance, get a lower rate, and reduce your monthly payments.
There’s no official minimum credit score for IRRRL loans, though you will need a current VA loan and certify that you live in the home. In the event your payment increases by 20% or more with the refinance, a credit check may be required.
VA cash-out refinance
Credit score: No official minimum
A cash-out refinance also has no official minimum credit score, though you’ll need a Certificate of Eligibility and certify that you live in the home. With VA cash-out refinances you can borrow up to 100% of the home’s appraised value (an appraisal is required).
Keep Reading: VA Refinance: 3 Ways to Refinance a VA Loan
USDA loans
Credit score: No official minimum
There are both streamlined and non-streamlined ways to refinance a USDA loan. Though there is no minimum credit score requirement on any of these, the USDA will use your total debt and credit score to assess your eligibility.
The only exception is on streamlined-assist loans, which require no credit check at all. As with all the loans on this list, lenders are free to institute credit score minimums they deem appropriate. You will also need to live in the home as your primary residence and meet certain income limitations.
How to raise your credit score to get the best refi rate
If your credit score isn’t high enough to qualify you for the refinance or interest rate you need, you might consider increasing your score before applying.
You can do this by:
- Paying down your balances
- Settling any late or overdue accounts
- Reporting errors you find on your credit report
- Asking for a credit line increase on an existing account
- Becoming an authorized user on a high-credit borrower’s credit card
Meet the expert:
Aly J. Yale
Aly J. Yale is a personal finance journalist with work featured in Forbes, Fox Business, The Motley Fool, Bankrate, The Balance, and more.
