7 ways to refinance a mortgage if you have ‘bad’ credit

Effective November 16, 2025, both Fannie Mae and Freddie Mac are removing the minimum credit score requirement from their conventional loan eligibility guidelines. Loan approval will instead be based on an evaluation of overall credit risk factors.

 

When you refinance, you replace your existing mortgage with a new loan to save money or borrow against your equity. Refinancing can help you reduce your monthly payment, which can be especially helpful for homeowners with bad credit who are saddled with other debts. However, because you’re taking out a new loan, you’ll need to meet your lender’s eligibility criteria - which often includes credit requirements.

It's still possible to refinance a mortgage if you have less-than-perfect credit, but only with certain loan types. If your credit isn’t so great but you’d like to refinance your mortgage, here’s what you need to know.

What credit score do you need to refinance a mortgage?

While Fannie Mae and Freddie Mac no longer enforce a set minimum credit requirement for conventional loans, lenders will consider your credit as one of several eligibility factors.

There’s no such thing as a “bad” credit score, but lenders assign ratings to ranges of credit scores:

• Excellent: More than 800
• Very good: 740 – 799
• Good: 670 – 739
• Fair: 580 – 669
• Poor: Less than 580

Your credit score impacts not only your eligibility for a refinance loan but also the interest rate you’re offered. In general, borrowers with higher credit scores are offered lower interest rates. However, your credit score isn’t the only factor that lenders consider. They’ll also be looking at your income, savings, and debts.

Historically, you needed a minimum credit score of 620 to get a conventional loan. However, if your credit score is slightly lower and you have a high income and a low debt-to-income ratio, you may still be eligible. 

If you’re looking to refinance with an FHA loan, you’ll typically need a credit score of at least 580. While the U.S. Department of Agriculture doesn’t enforce a credit requirement for USDA loans, lenders typically require you to have a credit score of at least 620. Similarly, the U.S. Department of Veterans Affairs does not set a credit requirement for VA loans, but lenders prefer a minimum credit score of at least 620.

7 options for refinancing your home with ‘bad’ credit

Here are seven ways you can maximize your chances of refinancing your home with a lower credit score.

1.  Apply with a co-borrower or co-signer

If you’re having trouble qualifying for a refinance loan on your own, one option is to add a nonoccupying co-signer to the loan. That means you apply for a refinance with someone you don’t live with but who agrees to assume responsibility for the loan if you default. This differs from a co-borrower, who is another person on the loan  who lives in the home and shares the title.

2.  Fannie Mae’s RefiNow™

Fannie Mae’s RefiNow™ is a flexible refinancing option that has no minimum credit score requirement. It’s designed to help make it easier to qualify for a refinance and minimize the costs. Fannie Mae’s RefiNow™ loans do not have a credit requirement and are available to homeowners with a debt-to-income ratio (DTI) of up to 65%.

To qualify, you can’t earn more than the local median income, and you’ll need to have a Fannie Mae-owned mortgage on a single-unit property that is your principal residence. You’ll also need to have made no late payments on your current home loan in the past 6 months and no more than one missed payment in the last year.

3. Freddie Mac’s Refi Possible^®

The Refi Possible® program is designed to help low- and moderate-income borrowers with a Freddie Mac-owned mortgage refinance and reduce their housing costs. The program is designed to help borrowers with single-unit primary residences save on their monthly principal and interest payments.

Freddie Mac has no minimum credit score requirement for this refinance option. To qualify, you’ll need to have a DTI of 65% or less, a history of on-time payments, and an income that is less than or equal to 100% of the mean income in your area.

If you’re looking to do a cash-out refinance, this loan option may not make the most sense, as the amount you’re able to withdraw is capped at $250.

4.  FHA refinances

The Federal Housing Administration offers several refinancing options – a Streamline, simple, or a cash-out refinance.

FHA Streamline refinance

FHA Streamline refinances are designed to provide a simpler and faster process for refinancing your FHA mortgage. A Streamline refinance allows you to replace your FHA loan with a new FHA loan without a credit check, as long as you’re not removing a borrower from the loan. You’ll be required to meet the usual credit check requirement if you want to refinance and convert a conventional loan into an FHA loan or vice versa.

FHA simple refinance

A FHA simple refinance is a straightforward way to refinance from one FHA loan to another to lower your interest rate and monthly payment. Like with your original FHA loan, you typically need a minimum credit score of 580 to qualify. You can roll your closing costs into the new loan to make it easier. This is a rate-and-term refinance, so you’re unable to borrow any equity.

FHA cash-out refinance

A cash-out refinance allows you to use the equity you’ve built in your home to borrow money. Your current mortgage is replaced by a new, larger loan - and then you withdraw the difference in cash. To do an FHA cash-out refinance, you’ll need a minimum credit score of 580.

5.  VA refinances

The U.S. Department of Veterans Affairs offers VA loans to active-duty military servicemembers, veterans, and their eligible surviving spouses. The VA has two refinancing options- the VA Streamline refinance and a cash-out refinance.

VA Streamline refinance

A VA Streamline refinance is also known as a VA Interest Rate Reduction Refinance Loan (IRRRL). If you already have a VA loan, this type of refinance can help you lower your interest rate and reduce your monthly payment. A VA IRRRL can also help you switch from an adjustable-rate mortgage to a fixed-rate mortgage to make your monthly payments more stable. While the VA does not enforce a minimum credit requirement, lenders typically expect you to have a minimum credit score of at least 620.

VA cash-out refinance

It’s also possible to do a cash-out refinance with a VA loan. With this option, you can borrow against your equity and use the money for whatever you want. Like when you took out your original VA loan, you’ll need to provide your VA Certificate of Eligibility and meet your lender’s credit requirements.

6.  USDA Streamline-assist refinance

The U.S. Department of Agriculture offers USDA loans to help low- to moderate-income borrowers buy a home in specific rural areas. The USDA also provides a Streamline-assist refinance program to homeowners with USDA mortgages. Like other types of government-backed streamline refinances, a USDA Streamline-assistant refinance helps reduce the complexity of the application process. Homeowners can obtain a new USDA loan without credit checks, appraisals, or inspections.

Rocket Mortgage^® does not offer USDA loans, but we want to ensure you understand all your borrowing options so you can make the best choice for you.

7.  Seek additional resources from your lender

If none of these options works for you, contact your current mortgage lender to see if you can use your existing relationship to improve your chances of refinancing. Generally, the better your payment history, the better your chances of compensating for a bad credit score.

If you’re experiencing financial hardship, your lender may be amenable to a loan modification or forbearance, depending on the situation.

Tips for improving your credit score before refinancing

If you wish to refinance but your credit score isn’t so great, there are steps you can take to repair your credit over time. This can help you qualify for a lower interest rate when you do refinance.

• Make your payments on time. Your debt repayment history is the most important factor that impacts your credit score.
• Pay down high-interest debt. The amount of debt you have overall can also greatly affect your credit score. You can improve your credit score by paying down high-balance credit card accounts. Try to use those accounts less frequently to keep your credit utilization ratio low
• Consider a debt consolidation loan. If you have debt across several credit cards, a debt consolidation loan can help make paying down what you owe more manageable. A single loan will pay off your high-interest debt, leaving you with a single payment each month to address that debt.
• Avoid opening new lines of credit. Each time you apply for a new line of credit, the lender will run a hard inquiry, which can ding your credit score. It’s more effective to keep existing lines of credit open than it is to open new ones.
• Check your credit report. Routinely review your credit report for errors or omissions that may be negatively impacting your score. You can obtain a free weekly credit report from the three major credit reporting bureaus by visiting AnnualCreditReport.com.

Should you refinance your mortgage with bad credit?

If your credit isn’t great but you qualify for a refinance, it can make sense to do so if you stand to benefit. If you’re able to lower your interest rate, you can reduce your monthly payment and save money. Just be sure you plan to live in the home long enough to break even on the up-front costs.

If you’re refinancing to take cash out, make sure you compare the interest rate on the new mortgage to the one on your current loan. If your interest rate is going to increase, it might not be worth paying the closing costs and winding up with a higher monthly payment. In this case, a different financing option might be more beneficial.

FAQ about refinancing with bad credit

Here are answers to common questions about refinancing with a low credit score.

Can I refinance a mortgage with bad credit?

It’s possible to refinance a mortgage with bad credit, but only with certain loan types. If your credit score is on the lower side, you can boost your chances of approval by having a low DTI ratio and substantial income and savings.

Can I refinance with a credit score below 600?

You can refinance an FHA loan with a credit score as low as 580. Fannie Mae’s RefiNow™, Freddie Mac’s Refi Possible^®, and FHA Streamline refinances do not have a credit minimum.

Can I refinance if I have late payments on my record?

Having late mortgage payments on your record can make it harder to qualify for a refinance. Having good credit and a high income can help offset your payment history.

What is the minimum credit score for an FHA refinance?

In many cases, you’ll need a credit score of at least 580 to refinance an FHA loan. However, some types of FHA Streamline refinances do not require a credit check.

The bottom line: You have refinance options, even with bad credit

If you’re looking to refinance your mortgage, bad or low credit scores don’t have to get in your way. That’s because many loan refinancing options and programs exist that are specifically designed to help borrowers in need of assistance to cut their monthly payments and overall expenses.

If you’re ready to see what refinancing options are available, drop us a line and see how a Rocket Mortgage refinance can save you money today.

Refinancing may increase finance charges over the life of the loan.

Rocket Mortgage is not acting on behalf of FHA or HUD.

The FHA Streamline program may have stricter requirements in some states. In order to qualify for the FHA Streamline program, an immediate .5% minimum reduction in interest and mortgage insurance premium is required. Some states may require an appraisal.

The VA Streamline program may have stricter requirements in some states. In order to qualify for the VA Streamline program, you must have a VA loan. The VA Streamline is only available on primary residences. Cash-out transactions are not allowed. In order to qualify for a VA Streamline, a 0.5% minimum reduction in interest rate on the previous fixed-rate loan must occur if the new loan will be a fixed rate or a 2% minimum reduction in interest rate on previous adjustable rate mortgage loan must occur; a minimum of 6 months of consecutive mortgage payments must be paid on the current loan at the time of application. Some states may require an appraisal. Additional restrictions/conditions may apply.