If your credit score isn't great, refinancing your mortgage can feel out of reach. It isn't. Even with a low score, you're not stuck. There are still paths forward for lowering your monthly payment, getting out of an adjustable-rate loan, or shortening your term. It just takes the right approach and the right lender.
Can You Refinance with Bad Credit?
Yes, you can. It's not as simple as filling out a form and calling it done, but it's definitely possible. Most traditional lenders want to see a credit score of 620 or higher. But if your score falls below that, you still have options. Government-backed loans, including FHA refinances, are often available for scores as low as 580. If you've got at least 10 percent equity in your home, that number can dip to 500. There are also non-QM lenders who care more about your income and assets than your credit history. You might face higher rates or stricter terms, but the door isn't closed.
Which Loan Types Can Help?
FHA loans are the most common path for refinancing with bad credit. You may qualify with a 580 credit score and 3.5 percent equity. If your score is between 500 and 579, you'll need at least 10 percent equity in your home.
VA loans offer a streamlined refinance option for eligible veterans and active-duty service members. If you've been making your payments on time, you could qualify even with a lower score. USDA loans are available in certain rural areas and, depending on the program, may not require a credit check at all. Private lenders and non-QM programs can also be more flexible, especially if you bring steady income, a low debt-to-income ratio, or a co-signer to the table.
How to Improve Your Approval Odds
The stronger your overall financial picture, the better your chances. A great place to start is lowering your debt-to-income ratio by paying down credit cards and avoiding new debt while showing consistent income. If you have equity in your home, that works in your favor too. A smaller loan relative to your home's value gives lenders more confidence in your ability to repay. You can also consider refinancing now to stabilize your situation, then refinancing again once your credit has improved. If your credit took a hit due to medical bills or job loss, a letter explaining your circumstances can actually help. Lenders do take personal situations into account more than most people expect.
Not Sure If You Qualify Right Now?
Our team reviews your full picture, not just the number on your credit report. Let's find out what's possible for your situation today.
See My Refinance OptionsWhat Will Your Interest Rate Look Like?
Bad credit typically means higher interest rates. You might see rates that are one to three percent higher than what a borrower with excellent credit gets. But even if the rate isn't ideal, it can still be a win, especially if you're replacing a worse loan or escaping a rising adjustable-rate mortgage. The right move depends on the full picture, which is exactly why it helps to talk through the numbers before deciding. For a broader look at when refinancing actually makes sense, that post breaks it down clearly.
The Next Step
Refinancing with bad credit takes planning. It's not impossible, and with the right loan, you can lower your payments, bring more stability to your finances, and build toward a stronger financial future. Our local mortgage advisors are here to walk you through your options, answer your questions, and help you make the best decision for your situation.
