Key Takeaways
- Refinancing can temporarily lower your credit score by 5 to 10 points, but the impact is usually short-lived and recovers within a few months.
- Hard inquiries from rate shopping are typically grouped together by credit bureaus if done within a 14- to 45-day window, counting as just one inquiry.
- A refinance appears as a new loan on your credit report, which lowers the average age of your accounts and may cause a brief dip.
- The long-term benefits often outweigh the short-term hit – a lower interest rate or better loan terms can improve your financial health over time.
- Never skip payments during the refinancing process – missed payments can seriously damage your credit score.
Does Refinancing Hurt Your Credit Score? The Short Answer
Yes, refinancing can temporarily hurt your credit score – but usually only by a small amount. Most borrowers see a dip of about 5 to 10 points that recovers within a few months. Whether you refinance a mortgage, car loan, or auto loan, the credit impact follows the same general pattern.
The temporary dip happens because refinancing involves a hard credit inquiry (a formal check of your credit report), opening a new credit account, and closing an old one. Each of these factors impacts your credit score in a slightly different way. Let’s break down exactly how each one works so you can make an informed decision.
How Refinancing Impacts Your Credit Score: Three Key Factors
1. Hard Inquiries on Your Credit Report
When you apply to refinance, the lender pulls your credit report through what is known as a “hard inquiry.” Unlike a soft inquiry (like checking your own score), a hard inquiry can lower your credit score by a few points. According to the Consumer Financial Protection Bureau, you should avoid applying for a lot of new credit in a short time, as doing so may negatively affect your score.
Here is the good news: credit bureaus like Equifax, Experian, and TransUnion recognize that rate shopping is smart financial behavior. If you submit multiple applications for the same type of loan within a focused window – typically 14 to 45 days depending on the scoring model – those credit inquiries are grouped together and counted as a single inquiry.
This means you can shop around for the best rate from multiple lenders without worrying about each application individually damaging your score. Use Wirly’s refinance lender comparison tool to narrow your options before formally applying.
2. A Refinance Appears as a New Loan
When your refinance closes, the old loan is paid off and a new loan takes its place. On your credit report, this shows up as a closed account and a brand-new credit account. This affects your credit score in two ways:
- Average age of accounts decreases: Credit history length makes up a meaningful portion of your score. A new loan lowers the average age of all your accounts, which can temporarily lower your credit score.
- New credit activity: Opening any new credit account signals to scoring models that you have taken on new debt, which can be seen as slightly riskier in the short term.
The impact of a new loan on your credit score is usually modest and fades as the account ages. After several months of on-time payments on your refinanced loan, your score should recover and potentially improve.
3. Skipping Payments During the Refinancing Process
This is the most dangerous way refinancing could hurt your credit score – and it is entirely avoidable. Some borrowers mistakenly believe they can skip payments on their current mortgage or car loan while waiting for the new loan to close. That is not the case.
Payment history is the single most important factor in your credit score. Even one late payment can cause significant damage. Continue making all payments on your existing loan until your lender confirms the refinance is complete and the old account is officially closed.
According to CFPB complaint data from 2024, “trouble during payment process” was the most common mortgage-related consumer complaint across all major servicers. This underscores how important it is to stay on top of payments, especially during a transition like refinancing.
How Refinancing a Car Affects Your Credit Score
The credit impact of refinancing a car loan or auto loan follows the same principles as a mortgage refinance. A hard inquiry is performed, a new loan replaces the old one, and your average account age may dip temporarily.
However, auto loan refinances tend to have an even smaller impact because the loan amounts are typically much lower than a mortgage. The rate-shopping window still applies – if you get quotes from several auto lenders within a two-week period, those hard inquiries should be treated as one.
If refinancing your car loan gets you a significantly lower interest rate, the small, temporary credit score dip is usually worth the long-term savings on monthly payments.
How Long Does the Credit Score Dip Last?
For most borrowers, the timeline looks like this:
- Immediately after refinancing: Score may drop 5 to 10 points due to the hard inquiry and new account.
- 2 to 3 months later: Score begins to stabilize as the new loan ages and on-time payments are reported.
- 6 to 12 months later: Score typically returns to its pre-refinance level or higher, especially if the refinance improved your debt-to-income ratio.
Hard inquiries remain on your credit report for two years but only affect your credit score for the first 12 months, with the impact diminishing over time.
When Does Refinancing Make Sense Despite the Credit Impact?
A temporary 5- to 10-point dip is a small price to pay when refinancing delivers meaningful financial benefits. Consider refinancing when:
- You can secure a lower interest rate that reduces your monthly payment or total interest paid
- You want to switch from an adjustable-rate to a fixed-rate mortgage for stability
- You need to change your loan terms – for example, moving from a 30-year to a 15-year loan
- You want to remove private mortgage insurance (PMI) because your home equity has increased
Use Wirly’s refinance calculator to estimate your potential savings and determine whether the numbers work in your favor.
Risks and Considerations
While the credit score impact of refinancing is usually minor, there are other risks and costs to consider before moving forward.
- Break-even period: Refinancing involves closing costs – typically 2% to 5% of the loan amount. If you plan to move before you recoup those costs through monthly savings, refinancing may not make sense. Use the break-even calculator to find your timeline.
- Resetting the amortization clock: Refinancing into a new 30-year mortgage restarts your repayment schedule. You may pay more total interest over the life of the loan even with a lower rate.
- Hidden costs: Appraisal fees, title insurance, origination fees, and prepayment penalties on your current loan can add up quickly. Request a Loan Estimate from each lender so you can compare total costs.
- Rate lock risks: If your rate lock expires before closing, you could end up with a higher rate than expected. Ask your lender about lock periods and float-down options.
- Credit score timing: If you are planning to apply for other credit soon – such as a new credit card, auto loan, or another mortgage – the temporary score dip from refinancing could affect your approval odds or the rate you are offered.
According to the Consumer Financial Protection Bureau, your credit score is only one component of a mortgage lender’s decision. Other factors include your credit history, debt levels, savings, total assets, and current income. A small temporary dip should not be a dealbreaker if the refinance makes strong financial sense.
Tips to Minimize the Credit Impact of Refinancing
- Do all your rate shopping within a 14-day window. This ensures multiple hard inquiries are bundled together by the credit bureaus.
- Check your credit report for errors before applying. According to the CFPB, errors on your credit report can reduce your score inappropriately. Dispute any inaccuracies at AnnualCreditReport.com well before you apply.
- Keep making payments on your current loan. Never skip a payment during the refinancing process.
- Avoid opening other new credit accounts in the months surrounding your refinance application.
- Keep old credit cards open. Maintaining existing accounts helps preserve your credit history length and available credit.
Frequently Asked Questions
Does refinancing lower your credit score permanently?
No. Refinancing typically causes a temporary dip of 5 to 10 points. Your score should recover within a few months as you build a positive payment history on the new loan. The hard inquiry from the application affects your score for about 12 months before its impact fades entirely.
Will refinancing my mortgage affect my credit score the same way in every state?
Yes. Credit scoring models like FICO work the same way regardless of whether you live in Maryland, California, or any other state. The factors that affect your credit score – hard inquiries, new credit accounts, and payment history – are applied uniformly across all states.
How does refinancing a car affect your credit score differently than a mortgage?
The mechanics are the same for both a car loan and a mortgage refinance. However, because auto loans are typically smaller, the overall credit impact may be slightly less noticeable. The rate-shopping window for bundling hard inquiries applies to both types of loans.
Should I avoid refinancing if I have a low credit score?
It depends. If your credit score is already low, a temporary dip could push you further from qualifying for favorable rates on future credit. However, if refinancing gives you a lower monthly payment that helps you avoid missed payments, it could actually protect and improve your score over time. Weigh the trade-offs carefully.
How many points does a hard inquiry take off your credit score?
A single hard inquiry typically lowers your credit score by fewer than 5 points. For people with strong credit history and few recent inquiries, the impact may be even smaller. Multiple inquiries for the same loan type within a focused shopping window are usually counted as one.
Disclaimer: This article is for educational purposes only and does not constitute financial advice. Wirly is not a lender or mortgage broker. Your individual credit impact may vary based on your specific financial situation. Consult with a qualified financial professional before making refinancing decisions.
Published by the Wirly Editorial Team. This article was drafted using AI writing tools and reviewed for accuracy by our editorial team. All data claims have been verified against the sources listed below.
Sources
- Consumer Financial Protection Bureau (CFPB) – Guidance on how credit scores affect mortgage eligibility and rates
- CFPB Consumer Complaint Database – 2024 mortgage complaint data referenced for common consumer issues during refinancing
- CFPB Ask CFPB – General consumer education on credit reports, hard inquiries, and mortgage applications
Sources
- CFPB (Consumer Financial Protection Bureau) – Official consumer protection guidelines and mortgage resources
Written by the Wirly Editorial Team. Last reviewed: March 30, 2026. Fact-checked against CFPB guidelines (credit score and mortgage guidance, reviewed Dec 2024), CFPB complaint data 2024. See our methodology for how we evaluate lenders.