How to Refinance Your VA Loan With Bad Credit

4 minutes read

If you have a VA loan now, you may have a way to refinance it even if you have bad credit.

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Typically, lenders require you to have a minimum credit score in order to qualify for a refinance. It makes sense since the lender needs to decrease their risk of default. But with the VA streamline refinance, the VA doesn’t require lenders to verify your credit score, home value, or even your income.

You can get the streamline refinance just by verifying your mortgage payment history and proving that you benefit from the refinance.

Keep reading to see how this works.


The VA streamline refinance is a program strictly for veterans with a current VA loan. If you want to refinance your loan because you can get a lower interest rate or can refinance out of an ARM into a fixed rate loan, you may be able to do so the streamlined way.

The VA streamline refinance has two requirements:

  • You must have made your last 12 mortgage payments on time (some lenders allow one 30-day late payment)
  • You must benefit from the refinance by saving money or changing your loan’s term

That’s all the VA requires. They assume that if you’ve made your last 12 VA mortgage payments on time that your risk of default is pretty low in the future if you are able to snag a lower interest rate or less risky payment.

Keep in mind that the VA streamline loan is strictly a rate/term refinance. You cannot tap into your home’s equity with this loan. You can only refinance the outstanding principal balance of your loan plus any allowable fees. You cannot receive any cash in hand.


You probably wonder what will happen if your credit score is worse now than it was when you bought the home. It’s a valid concern, but in some cases, it won’t matter.

Lenders have the option to follow the VA’s requirements and not add anything to them or they can add their own requirements. If your credit score fell, you’ll want the lenders that don’t verify anything beyond what the VA requires. This will allow you to secure the VA refinance without the lender pulling your credit, verifying your income, or determining the current value of your home.

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Now there are some lenders out there that will pull your credit. Because the VA doesn’t underwrite the loan, the lender can add any requirements they want to the program. If a lender has a reason to believe your credit score fell or they think you are a high risk of default, they may pull your credit just to make sure. If that happens, just keep looking for a lender that won’t pull your credit for the VA streamline refinance.


If you can’t seem to find a lender that won’t pull your credit or you just want to improve your score just in case, take some or all of the following steps to get your credit score to increase quickly:

  • Get current on any late payments. If you missed any payments, it continually hurts your credit score until you get current on it. Do what you can to bring all payments current and then stay current on them moving forward.
  • Pay down your large debts. If you have large credit card balances outstanding, try to get the balances to decrease. A large part of your credit score is the credit utilization rate, which is a comparison of your outstanding credit to your total credit limit. Ideally, you don’t want a credit utilization rate higher than 30%.
  • Don’t apply for new credit. Each time you apply for new credit, your credit score gets hit for five points. If you open a new account, your credit score will fall even more because it lowers the average age of your credit. The ‘older’ your credit is, the better the impact on your credit score.

The VA streamline refinance does make it easy for anyone with a VA loan to refinance despite the fact that they have bad credit. As long as you can prove the timely mortgage payment history and the net tangible benefit, you are in good shape. If you are unsure, shop around and see what various lenders have to offer you despite your bad credit.

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