The Effects of Auto Refinancing on Credit Scores

It's no secret that every inquiry made on your credit report will reduce your score a few points, and having an auto refinancing application pulled will do the same. But, the real question is what the effects of auto loan refinancing have your credit score.

Auto refinancing is a new loan being taken out in your name at a different loan term, interest rate or monthly payment. Because this is a new loan the lender or bank will need to pull your credit report. As we know, this will hurt your credit score, but will it be a long term effect?

Refinancing a Car Loan May or May Not Hurt You

There are many different ways to go about auto refinancing with bad credit or good, and depending on which you choose will affect your credit score differently. If you're applying for a refi through a dealer chances are that your credit report will be pulled several times. This is because dealers get paid for a loan being approved, so they will send your information to a variety of lenders. After this many hits on your report you could see your score lowering by about five points per inquiry.

If you're going to apply for car refinancing through a bank make sure they're only going to pull your report once. If they are planning on pulling it more than once, then you are going to end up in the same situation as mentioned above. But, if they say they are only going to need the report one time your credit score should only lower about five points, if that.

The good news is that if you continue to make your payments on time and in full, then you're credit score will raise accordingly. After a few months of regular and timely payments you should have gained back the five points that was taken off for the inquiry plus some.

There are many reasons for refinancing a vehicle, and if you have the opportunity to either lower your monthly payments, lower your interest rate, or to shorten your loan term, we suggest doing so. There is no set time to wait to refinance a car, so the earlier you can save money the better! Who couldn't use more money their pocket? Fill out our online application today to see if you are pre-qualified to auto loan refinancing.