Refinancing your mortgage is great when you want to have lower interest rates or lower monthly payments. When considering this big financial decision, you may think about the impact it can have on your credit. Will it hurt your credit? Typically, it’s not a good move and it does affect your credit health. But, this impact is short-term. This means you don’t have to worry about your credit score if you are about to refinance your mortgage in Rocklin for the first time. However, refinancing many times will put a negative impact on your credit score long term.
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How Does It Affect Your Credit Score?
When you refinance your mortgage, your FICO score can get affected for one year. By opening a refinance home loan, your FICO score can be less than five points.
But, don’t worry as this can return to normal after a few months. Anytime you refinance your mortgage, there will be a temporary dip in your credit score .
The reason behind this is the hard inquiry being done on your credit report. Your mortgage lender will execute a credit check or will pull your credit report to determine if you qualify for refinance in Roseville home loan. This inquiry is recorded on your credit score as a result.
Your credit score also hit with an inquiry because when you refinance, you are considered as a borrower who hasn’t been successful to repay the loan and is ready to take a new loan.
One credit inquiry doesn’t have any major impact on your FICO score, while too many credit inquiries can largely decline your FICO score.
Applying For Multiple New Loans
If you apply for multiple loans from different lenders, it will hurt your credit score. You will be deemed as an unreliable borrower who is not fit for getting any loan.
So, while refinancing, it’s important to make sure you are focusing only on refinancing your mortgage home loan.
Cash-out Refinances May Hurt Your Credit Score
When you’re thinking to opt for a cash-out refinance, you can be creating more debt for your new bigger home loan in Rocklin than your old home loan. Thus, this will hurt your FICO score.
But, if you want to use the cash-out refinance option for paying down unsecured debt, it will be good for your credit score.
How To Prevent Hurting Your Credit Score When You Want To Refinance?
One easy thing you can do to prevent refinancing from adversely affecting your credit score is consolidating your credit inquiries while you are looking for mortgage rates from 14 to 45-day shopping window. This will lead to no multiple hard credits inquiries.
If you’re considering refinancing your home loan or mortgage, hiring a reputable mortgage broker is the best move to make this complicated process easy for you. Mortgage brokers are well-versed with the entire mortgage and refinance experience. They are the right people to save money and reach your financial goals without mistakes.