How Refinancing Affects Your Credit Score
Refinancing can save you money, but it almost always impacts your credit score. Explore this guide to understand the “dip,” the recovery, and how to protect your rating.
Select a Slice to Explore
Data based on FICO® Score models
Where Does the Impact Come From?
Your credit score is made up of five key factors. Refinancing touches nearly all of them differently. Click on the chart slices to see specifically how a refinance interacts with that factor.
Payment History (35%)
The Refinance Impact: Generally Neutral to Positive.
Refinancing essentially closes one loan and opens another. As long as you make payments on time for the new loan, your history remains strong.
The “Refinance J-Curve”
Most borrowers see a temporary drop in their score immediately after applying. This is normal. The chart shows the typical trajectory: a dip followed by a recovery as the new loan ages.
Understanding the Dip
- 📉 Hard Inquiry: Typically costs 5-10 points per application.
- 🆕 New Account: Lowers your “Average Age of Accounts.”
Showing: One hard inquiry resulting in a minor dip and steady recovery.
Refinance Impact Simulator
Every financial situation is unique. Select your loan type and primary goal to see a tailored breakdown.
Your Scenario
Estimated Impact Report
Short Term Effect
Minor dip due to inquiry
Protect Your Score
The benefits of a lower interest rate usually outweigh the temporary credit dip. Use these strategies to minimize the damage.
The 45-Day Rule
Credit bureaus treat multiple inquiries for the same loan type (mortgage, auto) as a single inquiry if done within a 14–45 day window. Do all your rate shopping at once.
Don’t Apply Elsewhere
While refinancing, do not apply for other credit cards or loans. New applications create more hard inquiries and signal risk to lenders.
Keep Old Cards Open
If consolidating debt, don’t close the credit cards you pay off. Keeping them open maintains your credit history length and lowers your utilization ratio.
Your Path to Financial Freedom Starts Here
Whether you’re refinancing, buying your first home, or renewing, I provide expert strategies to lower your payments and protect your credit.
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