Does Refinancing Your Mortgage Impact Your Credit Scores? | Intelligent Finance Guide

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Low financial literacy means most people applying for loans, mortgages or credit cards have never checked, nor heard of, their credit scores. By this time, the damage has often been done
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Refinancing your loan can impact your credit score in 3 different ways.
The first is through credit age, the overall duration of your credit history. If your original mortgage is your longest-held account, closing it in favor of a fresh loan may negatively impact your credit scores, although only initially.
The second is through hard inquiries. When you refinance, you’ll generally want to shop around with different lenders to find the best loan terms possible. However, when you apply for a loan and the potential lender reviews your credit history, it results in a “hard inquiry” on your credit report. Hard inquiries remain on your credit report for up to 24 months, and take a slight hit on your credit score.
Finally, your score can also drop if you inadvertently miss payments. Some borrowers have gotten into trouble by skipping a mortgage payment when they (incorrectly) assumed their refinance would go through. Refinancing your mortgage may take longer than you expect, so don’t count on the process closing by a certain month.
Does this mean you should not refinance your loan? Certainly not! In the long run, refinancing can save you an amount of money worth lots more than a few points’ drop in your credit score. However, it is always a good idea to stay aware of how each of your credit activities impacts your credit score.
Need to keep an eye on your credit score on a regular basis?
Well, all you need to do is sign up at the mymoneykarma website. We provide you free access to your credit score, detailed credit report, and personalized advice on how your credit can be improved. Moreover, checking your score with mymoneykarma is a soft inquiry, meaning it does not have any impact on your credit score. You can get started right away by following the link below.