5 Things You Should Know About Refinancing and Your Credit Score
Multiple mortgage applications shouldn’t affect your credit score when shopping within the 45-day mortgage credit window. Each competing lender does a hard credit check, but multiple credit checks should only count as a single inquiry when responsibly shopping for a home loan.
Beware, applying with too many lenders could result in lowering your score. Keep in mind, the 3 credit bureaus will see you’re shopping for a loan and sell your info to any clown who will pay them for the lead, triggering a deluge of unwanted calls and solicitations. This greedy and unethical practice, perpetrated daily by Transunion, Experian and Equifax, needs to stop immediately so please write your congresspeople and complain to anyone who gives a darn today. At Par 4 mortgage, we have a unique way to check your credit and minimize unwanted solicitations. Call for details.
Refinancing is a popular option for those looking to consolidate their debt, for lower interest rates, or for other potential benefits. But does refinancing affect your credit score? Maintaining a good credit score is important to ensure you can secure debt when you need it and at reasonable rates. Read on to learn about the relationship between refinancing and your credit.
1. Hard Inquiries When You Apply
Soft inquiries won’t affect your credit but hard inquiries will. When you apply to refinance a mortgage, loan, or another form of debt, the lender will pull your credit to determine if you’re a reliable borrower. Hard credit pulls can lower your credit score, though not by a lot.
2. Submitting Multiple Applications
Borrowers often apply to refinance with multiple lenders to compare rates and benefits. Multiple applications and hard credit pulls can negatively impact your credit score. Only apply with lenders you’re serious about and be conscious of when lenders are using a hard inquiry instead of a soft inquiry.
You can also take advantage of a small window where it’s obvious you’re comparing rates. There is a 45-day window where multiple credit checks appear as just a single inquiry from mortgage lenders.
3. Closing Old Accounts
One factor that impacts your credit score is your credit history. It can be beneficial to have old credit accounts you’ve made regular, timely payments on. When you refinance, you may be closing out an old account. This can hurt your credit score, though it’s possible to bounce back from that harm.
4. Making an Informed Decision
If you’re considering refinancing, check your credit score. Compare the benefits of refinancing against the potential risks to your credit score. Keep in mind that there are several things you can do to maintain and boost your credit score. It does take time, so be conscious of what could cause your score to dip. Be sure you’re confident in your decision to refinance and seek help from financial experts if you need it.
5. Practicing Good Credit Habits
There are several best practices to keep in mind when it comes to your credit. Work on having multiple credit accounts, but not so many that it looks like you’re struggling to manage your debt. Make all of your payments on time and pay more when you can. Keep your credit utilization low. This means not maxing out your borrowing limits.
You should also fact-check your credit reports for any errors. If you find them, dispute them as soon as possible to help identify and prevent potential fraud. With the right habits in place, you can borrow money when you need it and potentially secure low-interest rates, allowing you to pay less in the long run.
For more information on refinancing and your credit score, get in touch with the mortgage experts at Par 4 Mortgage. Are you located in Florida or Colorado? If so contact us today to learn more about us and the best loan options for you.