16th Sep 2026
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You already have a mortgage. But the rate, term, or monthly payment no longer works for you, and your credit score isn't where you'd like it to be. That doesn't automatically rule out refinancing.
A low credit score makes refinancing more challenging. It narrows your options, raises the rates you'll be offered, and means lenders will scrutinise other parts of your file — income, equity, and payment history — more closely than they would for a borrower with a 740 score. But several loan programs are specifically built for this situation, and some don't require a credit check at all.
Here are six ways to refinance your home with bad credit, what each option requires, and when each one makes sense.
6 Ways To Refinance Your Home With Bad Credit
1. Non-Occupying Co-Signer
One option for refinancing is to apply with a non-occupying co-signer—someone who doesn’t live with you but agrees to pay your loan if you miss payments.
When your lender reviews the loan, they’ll look at both your finances and your co-signers, including income, assets, and credit scores. For most conventional refinance programs, that lower median score still needs to meet the minimum threshold, typically 620 for conventional loans, or 580 for FHA-backed options. Depending on the loan, your co-signer might also have to be listed on the title of your home.
While having a co-signer can improve your debt-to-income ratio, your credit score still matters because lenders often use the lower of the two median credit scores.
Applying with a co-signer can be helpful, but there are responsibilities to keep in mind. If you can’t make your payments, your co-signer becomes responsible. Make sure you’re confident about covering the payments and that you and your co-signer understand the agreement fully.
2. Consider FHA Streamline Refinance
You might be eligible for an FHA streamline refinance if your existing mortgage is guaranteed by an FHA loan, which is issued by the Federal Housing Administration. You will just need proof that you have made on-time payments for the previous 12 months; neither income paperwork nor a house evaluation is required.
This is one of the few refinance paths available to borrowers with credit scores below 580, because the credit check is typically waived for the non-credit-qualifying version. A few downfalls: Unless you request an appraisal or ask the lender to raise your interest rate, you are unable to roll costs into your loan and will once more be responsible for paying FHA mortgage insurance.
3. Explore an FHA Rate-and-Term Refinance
Any borrower can apply for an FHA rate-and-term refinance, but only current FHA borrowers are eligible for an FHA streamline refinance. Borrowers generally need a minimum 580 credit score, and the loan-to-value ratio typically cannot exceed 97.75%. Similar to the streamline program, the goal of an FHA rate-and-term refinance is to lower your monthly housing expenses; it is not a cash-out program. All funds must be used to settle your current mortgage balance as well as any transaction-related expenses. On the other hand, you can include second and third mortgages in the amount that is refinanced using this method.
4. VA Refinances
The Interest Rate Reduction Refinance Loan (IRRRL) and a cash-out refinance are the two primary refinancing options provided by the VA.
Eligible veterans, active-duty service members, and surviving spouses can refinance an existing VA loan to achieve a lower interest rate through the IRRRL program, commonly known as a "VA Streamline refinance," frequently without the requirement for a new appraisal or credit check. Those with poor credit may find this simplified method advantageous as it can result in lower monthly costs.
5. USDA Streamlined Assist Program
The USDA Streamlined Assist program does not require a credit check, similar to streamlines offered by the FHA and VA. Rather, anyone who has a USDA loan and has made on-time mortgage payments for the previous 12 months is eligible.
This program not only does not run a credit check, but it also does not take your debt-to-income ratio into account when establishing your eligibility, nor does it call for a recent home appraisal or inspection. Similar to other streamline programs, there must be a minimum result, meaning your monthly mortgage payment must decrease by at least $50.
6. Consider a Portfolio Refinance Loan
A portfolio loan is an additional option for refinancing with a poor credit score. These are loans that are created by the original lender and are held by them rather than being sold on the secondary market. Banks and mortgage brokers offer portfolio loans, which have different requirements than regular refinance home loans and may have more flexible terms. If the lender wants your business or if you've been a long-time bank or mortgage customer, you have a higher chance of getting approved for a portfolio loan.
But it doesn't mean lenders will fund borrowers of any kind, regardless of their qualifications. They will closely examine your finances and credit history because they still want portfolio loans to be successful. A portfolio lender can be more accommodating if you have had application issues that most lenders have not been willing to accept.
Consult a full-service mortgage lender or mortgage broker to see if you qualify for a portfolio loan; they can shop your application to potential portfolio lenders.
When Should You Consider Refinancing Your Mortgage?
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You want to modify the terms of your loan: Refinancing your loan to a longer-term will reduce your monthly payments and allow you more time to pay off what you owe. If you would like to reduce your interest rate or pay off your loan sooner, you can consider refinancing to a shorter term.
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The goal is to remove mortgage insurance: If you put less than 10% down on an FHA loan, you will be required to pay a mortgage insurance premium (MIP) for the duration of the loan. Many homeowners refinance to a conventional loan to save money after holding onto their FHA loans until they have 20% equity.
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You want access to cash: With a cash-out refinance, you can take out a loan that has a larger principal amount than you already owe and accept the difference in cash. Cash-out refinance proceeds can be used for debt repayment, property repair expenses, and other expenses.
How To Improve Your Credit Score Before Refinancing
1. Check Your Credit Regularly
Make sure you know what’s on your credit report. Look for any mistakes or areas where you can improve. Keeping an eye on your credit score helps you stay on track.
2. Consider a Secured Credit Card
If you're having trouble getting a regular credit card, try a secured one. You pay a deposit, and that deposit becomes your credit limit. Using it wisely can help boost your score.
3. Keep Credit Usage Low
Don’t use too much of your available credit. Try to keep your spending below 30% of your total credit limit each month. This will help increase your credit score.
4. Pay Bills on Time
Always pay your bills on time. This is the most important step to improving your credit. Even one late payment can hurt your score, so set reminders to make sure you never miss a due date.
Improving your credit takes time, but following these steps can help you get the best rates when it’s time to refinance.
5. Reduce Outstanding Debt Balances
Paying down revolving balances — particularly credit cards — below 30% of each card's limit can produce score improvements within one to two billing cycles. This is typically the fastest lever available to borrowers who have the cash to act on it.
Wrapping It Up
Refinancing with bad credit is possible — but the right path depends on what kind of loan you currently have and how low your score actually is. Borrowers with FHA, VA, or USDA loans have access to streamline programs that skip the credit check entirely. Those without a government-backed loan may qualify through FHA rate-and-term refinancing, a co-signer arrangement, or a non-QM program that weighs equity and income alongside credit.
Before applying anywhere, pull your credit reports from AnnualCreditReport.com and check for errors — incorrect derogatory marks, accounts that aren't yours, and outdated negative items are more common than most borrowers expect. Fixing even one error can move your score enough to change your program options.
Sistar Mortgage works with borrowers across the credit spectrum. We offer FHA, VA, USDA, conventional, and bank statement refinance programs, and our loan officers will tell you plainly what you qualify for — including what you'd need to change to access better terms. There's no cost to find out where you stand.
[ Get Pre-Qualified for a Refinance][Speak With a Loan Officer]
Sistar Mortgage NMLS #68434 | Equal Housing Lender | Rates subject to change | This content is for informational purposes only and does not constitute a loan commitment or guarantee of approval.
Frequently Asked Questions
1. What credit score do I need to refinance my mortgage?
The minimum depends on the loan type. Conventional refinances typically require a 620 score. FHA rate-and-term refinances accept scores as low as 580. FHA Streamline, VA IRRRL, and USDA Streamlined Assist refinances may not require a credit check at all if you meet payment history requirements.
2. Can I refinance with a 580 credit score?
Yes, in several programs. FHA rate-and-term refinances accept 580. FHA Streamline refinances (for existing FHA borrowers with 12 months of on-time payments) may skip the credit check entirely. Non-QM programs from lenders like Sistar Mortgage can also accommodate scores in this range depending on equity and income.
3. Does refinancing hurt your credit score?
Refinancing triggers a hard credit inquiry, which may lower your score by 5 to 10 points temporarily. If you rate-shop within a 45-day window, multiple mortgage inquiries are typically counted as a single inquiry by FICO and VantageScore. The long-term impact of successfully refinancing to a lower rate is generally positive.
4. Can I refinance with a VA loan if I have bad credit?
The VA IRRRL (Interest Rate Reduction Refinance Loan) frequently does not require a credit check or new appraisal for eligible veterans refinancing an existing VA loan. This makes it one of the most accessible refinance options for veterans with credit challenges, as long as the refinance results in a lower monthly payment or moves you from an adjustable to a fixed rate.
