While refinancing your mortgage can be a great way to free up cash, lower your monthly payment or interest rate, it can impact your credit score. Typically, your lender will have to do a hard credit check when you refinance. Anytime a hard credit check is done, it has the potential to decrease your credit score. However, some benefits can outweigh any negative effects, such as the ability to free up cash or the savings you may find as a result of refinancing your home. And, as you pay off your balance over time, your credit score will likely improve as the result of a positive payment history.
Before you begin the refinancing process, keep these considerations in mind:
When you apply, lenders will check your credit score and history, also known as a hard inquiry on your credit report
If you’re shopping lenders, multiple credit inquiries will appear on your credit report (unless they provide you a quote first with no impact to your credit) – be mindful that multiple inquires in a short timeframe (6 months) can have a significant impact on your credit than just one inquiry.