What FICO Score is Needed to Refinance a Mortgage?

Your FICO score can help you get the best refinance rate availble.
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If you ever used credit, you have a FICO score, which is a numeric value assigned to your credit habits and history by a company called FICO, or The Fair Isaac Corporation. With mortgage interest rates at historic lows, refinancing your mortgage could save you thousands of dollars in interest over the life of your loan. A lower rate means lower monthly payments, or you might want to refinance to shorten the term of your loan. Your FICO score plays a crucial role in determining just how much money you’ll save. The better your score, the better the interest rate you’ll get on your refinance loan.

Refinancing Process

When you refinance your home, you replace your current home loan with a new home loan. The new loan pays the balance on your old loan. The process is similar to the one you went through to get your initial mortgage. You apply for a loan, which is based on the balance of the current loan. The lender considers your FICO score and debt-to-income-ratio to determine if you qualify for the loan -- and the rate of the loan. If you qualify, the lender sends an appraiser to verify the value of your home and the amount of equity you have in it.

FICO Score

Your FICO score, widely referred to as your credit score, gives lenders an idea of your creditworthiness. The three-digit score ranging from 300 to 850 can fluctuate depending on your credit usage, timely payments and overall history of credit use. If you’ve paid your mortgage and other credit obligations on time and have a FICO score of 640 or higher, chances are you’ll get approved for a refinance. FHA loans and Veteran’s Administration loans have lower minimums to qualify for a loan, but their lenders are not required to accept those scores. Just because you can qualify for a refinance loan, doesn’t mean it’s a done deal.


Equity is important when it comes to a refinance. If you bought your home with a small down payment and its value has decreased, chances are you have little to no equity. That’s a deal breaker. Many lenders want to see an 80 percent loan-to-value ratio or greater before they will approve a loan. But sometimes, you can get around having 20 percent equity in your home by purchasing private mortgage insurance (PMI), which of course, will cost you. You gain equity in your home as you pay down your mortgage and your home value increases.

Improving Your Score

MyFICO advises that you might want to take steps to increase your score to more than 760 to get the best interest rate available. To do this, carefully review your credit report and correct any inaccuracies, pay down high balances on your debt and make timely payments on all your accounts. If you missed payments, work out a strategy with your creditor to get current. Raising your score takes time, but it could save you hundreds of dollars a month.

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