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Does refinancing an auto loan affect your credit score?
I need to refinance an auto loan that I have and I am just wondering if this will affect my credit score? If so, by how many points?
I need to refinance an auto loan that I have and I am just wondering if this will affect my credit score? If so, by how many points?
Your credit score will be affected in a number of ways.
When you start applying for new finance the vehicle financiers will need to make a hard enquiry on your credit. This usually causes your credit score to drop by a few points as long as only a few enquiries are made – if lots of enquiries are made your score can drop by 50+ points. Thankfully if only a few enquiries are made you’ll get these lost points back within a few months as long as no more hard enquiries are made.
This means that you should choose one or at most TWO refinancing companies to get a quote from, if you try to get too many you’ll drop your credit score drastically and be unlikely to be approved for your refinancing.
When you refinance you’ll also reset the age of that loan, so if you’ve had that loan for say 3 years it’ll now appear as starting when the new refinancing kicked in. Credit age accounts for ~15% of your FICO score so it’s important to take that into consideration.
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