Can I Refinance My Mortgage With Bad Credit?

You may be able to refinance a mortgage with a lower credit score. Credit requirements vary by lender and the type of loan.
Barbara MarquandSep 8, 2020
Can I Refinance My Mortgage With Bad Credit?

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Refinancing your mortgage is more challenging with bad credit, but it may still be possible.

Credit requirements vary by the type of refinance loan and the lender. Some options are available for people with credit scores in the 500s and 600s.

Here are some tips for refinancing with a lower credit score:


Here are some mortgage refinance options to consider if you have a lower credit score:

, which are insured by the Federal Housing Administration, have less strict credit requirements than other types of mortgages.

To qualify for an FHA streamline refinance, your current mortgage must be an FHA loan and you must be current on the payments.

There are two types of FHA streamline refinance loans: credit-qualifying and non-credit-qualifying. The credit-qualifying option requires a minimum credit score of 580. The non-credit-qualifying FHA streamline refinance doesn't require the lender to do a full credit check or calculate your debt-to-income ratio. The downside? You may pay a higher interest rate than with the credit-qualifying version. A isn't required for either option.


You can refinance any type of mortgage, such as a , into a rate and term FHA refinance. "Rate and term" simply refers to the ability to get a lower rate or change the loan term. The lender will do a credit check and calculate your debt-to-income ratio. The FHA requires a minimum credit score of 580.

An lets you tap into home equity. The new loan can be up to 80% of the home's value. The FHA requires a minimum credit score of 500 for a cash-out refinance, but lenders may require higher scores.

Guaranteed by the U.S. Department of Veterans Affairs, VA loans are for military service members, veterans and eligible surviving spouses. The VA doesn't mandate a certain credit score for purchase or refinance loans, but lenders can have their own requirements, which may be as high as 660.

If you already have a VA loan, you can refinance with a VA Interest Rate Reduction Refinance Loan to lower the interest rate or move from an adjustable to fixed rate. This loan is also known as a because the process is simplified. The VA doesn't require a new credit check or appraisal for a streamline refinance, but the lender might.


Qualified homeowners can refinance a conventional or VA mortgage with a VA cash-out refinance. This refinance loan allows, but doesn't require, eligible borrowers to tap into home equity. It also gives the opportunity to save money with a lower interest rate, move to a fixed-rate from adjustable-rate mortgage or, if you have a conventional loan, .

USDA mortgages are for rural home buyers and are backed by the U.S. Department of Agriculture. You must have a to take advantage of the streamlined assist refinance loan. The program doesn't require a new credit review, debt-to-income calculation or home appraisal, in most cases. However, you must have been current on your mortgage for the 12 months prior to applying.


Two programs may allow you to refinance if you owe more than your home is worth: the Freddie Mac Enhanced Relief Refinance and the Fannie Mae High Loan-to-Value Refinance Option. Both programs are geared to homeowners who wouldn't otherwise qualify to refinance because they owe more than 97% of the value of their homes. They replace the Home Affordable Refinance Program, known as HARP, which operated from 2009 to 2018.


If you can't refinance now because of a bad credit score, focus on rebuilding your credit. Here's the bright spot: It's possible to elevate a low score fairly quickly. Small actions, such as paying bills on time and using a smaller percentage of your credit limit on credit cards, can make a big impact. Get your and monitor the changes.


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