Does Refinancing Hurt Your Credit Score?

September 10, 2009 7 Comments »

credit score

Mortgage Q&A: “Does refinancing hurt your credit score?”

Consumers always seem to be overly concerned about their credit scores and what impact certain actions may have on them; perhaps this is a result of all that clever marketing on behalf of the credit score creators and distributors.

When it comes to refinancing, your credit score probably won’t be negatively impacted unless perhaps you’re a serial refinancer.

When you refinance your mortgage, the bank or mortgage lender will pull your credit report and you’ll be hit with a credit inquiry as a result.

The credit inquiry alone won’t necessarily lower your credit score, but if you’re constantly refinancing and/or applying for other forms of new credit, the inquiries could add up to a point where they’re deemed unhealthy.

You Could See a Credit Score Ding When Refinancing

As a result, your credit score could see a bit of a ding, though it probably wouldn’t be anything substantial unless you’ve been applying anywhere and everywhere for new credit. By a “ding,” I mean 5-10 points or so. Of course, it’s impossible to say how much your credit score will drop, or if it will at all, because each credit profile is unique.

Put simply, those with deeper credit histories will be less affected by any credit harm related to the refinance inquiry, while those with limited credit history may be see a bigger impact. Think of throwing a rock in an ocean vs. a pond, respectively. The ripples will be a lot bigger in the pond.

Also keep in mind that shopping for a refinance in a short period of time (say a month) may result in a large number of credit pulls, but it will only count as one credit hit because the credit bureaus now know the routine when it comes to shopping for a mortgage.

This differs from shopping for multiple credit cards in a short period of time, which could hurt your credit score more because you’re applying for different products with different issuers.  Even if you shop for a mortgage refinance with different lenders, it’s for the same single purpose, so you shouldn’t be hit more than once.

Another potential negative to refinancing is that you’d lose the credit history benefit of the old mortgage account, as it would be paid off via the new refinance.

So if your prior mortgage had been with you for say 10 years or more, that account would become inactive once you refinanced, which could cost you a few points in the credit department.

Remember, older, more established tradelines are your credit score’s best asset, so wiping them all out by replacing them with new lines of credit could do you harm in the short-term.

Cash Out Refinance Means More Debt, Lower Credit Score

Also consider the impact of a refinance that results in a larger loan balance, such as a cash-out refinance.

The larger loan balance will increase your credit utilization, meaning you’d be using more of your total available credit, which could push your credit score lower. In short, the more credit you’ve got outstanding, the higher a risk you present to creditors.

But all in all, a refinance should have a compelling enough reason behind it to eclipse any credit score concerns, so focus on why you’re refinancing first before worrying about your credit score.

Read more: When to refinance a home mortgage.


  1. Lee March 20, 2017 at 10:06 am - Reply

    We have home valued at $198,000 paid mortgage for 14 years then 3 years ago refinanced owing $104,000 now owe about $95,000 credit score has been low since and report says my ltv on mortgage is too high, it is calculating from the $104,000 to the $95,000 still owed, not the homes original amount is there any way to correct this? No delinquencies on report, before refi was in high 700s now in mid 600s.

    • Colin Robertson March 20, 2017 at 2:30 pm - Reply


      Hmm, that seems strange…are you sure the mortgage is the issue and not something else on your report? I’m assuming your credit report only shows the current balance and highest balance of the mortgage, payment status, and any delinquencies. If it is in fact reporting the LTV, you may want to inquire with the creditor directly to fix their reporting.

  2. Amanda August 22, 2016 at 3:01 pm - Reply


    I just refinanced my school loans which I had a history for about 6 years. The other company paid off my previous loans but on my credit report dropped 30 points! My report shows that I have an average history of 1 year now instead of 6 and does completely gone South. I have nothing on that student loan that should have affected me negatively. How can I fix this problem and is this something that will stay low for a while now.


    • Colin Robertson August 22, 2016 at 7:30 pm - Reply


      It could be a temporary drop, though if you have no old credit accounts it’s possible that it reduced the average age of your accounts significantly and thus is working against you. But hopefully it’s just a blip and you’ll bounce back soon.

  3. Nancy Pontious April 6, 2015 at 11:13 am - Reply

    I think you are better off receiving calls than putting all of your personal information out there for an identity thief. At least at the lender you will know the source of the theft.

  4. Dave Kucifer March 10, 2015 at 4:46 pm - Reply

    I am considering refinancing my current 75,000 mortgage (4.375% apr) in order to get lower rate and include taxes and interest in monthly payments (currently being paid from savings).
    Since I do not plan to be in my home longer than three or four years I am most interested in a no closing cost refinance.
    current credit score is excellent.
    At this point I do not want to be deluged with phone calls from numerous prospective lenders, and prefer all contacts be email. Are there lenders who would be willing to deal through the web?


    • Colin Robertson March 10, 2015 at 7:39 pm - Reply

      Hey Dave,

      I believe Zillow allows you to shop anonymously, but when you get down to the nitty gritty you’re going to need to give out some personal info and probably get on the phone with someone. I guess the best way to reduce the amount of calls is to really decide what you want before you reach out to anyone. Good luck!

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