How Does Refinancing Your Mortgage Impact Your Credit Score?

Refinancing your mortgage can be a smart financial move—helping you lower your interest rate, reduce monthly payments, or adjust your loan term. However, like any new loan or line of credit, refinancing can temporarily impact your credit score.

Luckily, the impact is usually not as bad as you might think, especially if you take the right steps to protect your credit throughout the process.

In this guide, we’ll break down why your credit score may change during the process, how much of an impact to expect, and five tactics for minimizing or avoiding the drop altogether.

Why Does Applying For a Mortgage Refinance Impact Your Credit?

When you apply for a refinance, credit bureaus assess the request as a new loan application. This can lead to a temporary dip in your credit score due to the hard inquiry required by lenders. However, credit bureaus don’t inherently see refinancing itself as negative. The score impact comes from the credit inquiry and potential changes to your credit mix and account history. The drop is usually small and short-lived, and maintaining on-time payments can help your score recover quickly.

But this isn’t just the case when you refinance a mortgage. The same applies if you’re refinancing an auto loan or applying for a personal loan to consolidate high-interest debt.

When you refinance your mortgage, your credit score will drop for a few reasons. Let’s look a little deeper into these.

Hard Credit Inquiries

Whenever you apply for a loan, whether a mortgage, car loan, or credit card, the lender will do a hard pull on your credit report. This allows them to dig deeper into your financials and borrowing history to understand your creditworthiness.

However, when this hard credit inquiry happens, it can tick a few points off your credit score. Shopping around for the best mortgage rate among several lenders may trigger multiple hard inquiries, which can cause a dip in your credit score.

On the bright side, the credit score decline is small and usually short-lived. Most inquiries will stay on your credit report for two years, but you’ll only feel their impact for a year or less.

A Refinance Is Seen As a New Loan

Refinancing a mortgage can also reduce your credit score because credit bureaus view it as a new loan replacing an old one. Because 15% of your credit score consists of your length of credit history, refinancing could slightly reduce your score by lowering the average age of your accounts.

However, your original mortgage will remain on your credit report for up to 10 years, still contributing to your credit history, meaning the impact on your credit age is typically small and diminishes over time. Even though you have a history of making mortgage payments, your refinanced loan is considered a new account with no established payment history. Because credit age makes up part of your score, this reset can cause a slight dip. However, as you make on-time payments and reduce your balance over time, your credit score will recover and may even improve.

If You Miss Payments on Your Current Loan

Refinancing takes time, and one of the biggest mistakes borrowers can make is assuming they can stop paying their current mortgage once they’re approved. To protect your credit score, continue paying your existing loan until the refinance officially closes.

Double-check your closing date and confirm when your first payment on the new loan is due, as processing delays can push back timelines. Setting up payment reminders or using auto-pay can help ensure you don’t accidentally miss a due date. It’s also a good idea to request a payoff statement from your current lender to understand the exact amount needed to close out your loan. Unexpected delays happen, so having extra funds available for another payment can prevent financial strain. Before skipping a payment, always verify with your new lender that your old loan has been fully paid off and your new payment schedule is in place.

How Much Does a Refinance Impact Your Credit?

The impact on your credit score when you refinance depends on a few factors. You could see your score drop by only a few points or by a significant amount.

When a hard inquiry is done during the application process, your credit score will drop anywhere from two to five points. However, if you start the process with multiple lenders to see who will offer the best rate, the inquiries can start adding up, which would cause your credit score to drop further.

The one caveat is if all the inquiries are done within a 14-day period. Credit bureaus see multiple inquiries in a short period as one single inquiry. So, it’s best to do your shopping within a 14-day period (more on this below).

If your current mortgage is one of your oldest credit accounts, refinancing could slightly reduce your credit score by lowering the average age of your accounts. However, this impact is typically minor because closed mortgage accounts remain on your credit report for up to 10 years, still contributing to your overall credit history. While refinancing does reset the loan’s age, factors like consistent on-time payments and responsible credit management play a much bigger role in your credit score over time.

The exact impact of a refinance on your credit score depends on various factors, including your overall credit profile and how many recent credit inquiries you have. A single mortgage-related hard inquiry typically lowers a credit score by two to five points. However, if multiple factors change at once—such as opening several new credit accounts, increasing credit utilization, or closing other long-standing accounts—a more significant drop could occur. In most cases, though, the effect of refinancing on your credit score is temporary and modest, with recovery happening within a few months of making on-time payments.

What If Your Credit Score Drops Below the Minimum Requirement?

If your credit score is right at a lender’s minimum requirement and it drops slightly after applying, you might wonder whether the lender will use your original score or the updated one.

Most lenders pull your credit at the time of application and use that score for qualification. However, lenders may check it again if closing takes an unusually long time or new financial activity is detected, such as opening a new loan or missing payments.

If your score drops below the minimum, your approval could be at risk. In some cases, lenders might still proceed if the drop is minor and other factors—such as income, debt-to-income ratio, and home equity—are strong. Some lenders offer alternative loan programs, manual underwriting, or credit rescore options, which may help your application proceed despite a drop in your credit score.

However, if the new score disqualifies you, you may need to explore alternatives, such as switching to an FHA refinance, improving your score before reapplying, or working with a lender that offers more flexibility.

Tips To Avoid a Drop in Credit Score

Before refinancing your mortgage, consider a few things to protect your credit score.

1. Check Your Credit Reports Before Applying

Before shopping for a refinance, review your credit report for errors or outdated information that could lower your score. You can access free credit reports annually at AnnualCreditReport.com. If you spot any mistakes—such as incorrect balances, late payments that weren’t actually late, or accounts that aren’t yours—dispute them with the credit bureau before applying for a refinance. A cleaner credit report ensures you qualify for the best rates.

Once you’ve reviewed your credit report, take note of your current credit score. If your score is near a lender’s minimum requirement, it may be wise to wait before applying, especially if you can improve it. Paying down credit card balances, making on-time payments, and avoiding new credit inquiries can help raise your score, potentially unlocking better interest rates and loan terms. On the other hand, if your score is already in a strong range (e.g., 740+), you’re likely in a good position to move forward with refinancing.

2. Research Lenders Without Hurting Your Score

Shopping around for the best refinance deal is crucial, but multiple hard credit inquiries can lower your score. To prevent this:

• Stick to a 14-day window. Credit scoring models treat multiple mortgage-related inquiries within a short timeframe as a single inquiry, minimizing the drop. So, try to complete your applications within two weeks to minimize the impact.
• Ask for a soft credit pull. Some lenders can provide rate quotes based on a soft pull, which doesn’t affect your score. While not all lenders offer this, it’s worth asking before allowing a hard credit check.

3. Work with a Mortgage Broker for Efficient Shopping

Instead of applying with multiple lenders yourself, consider working with a mortgage broker. Brokers can access multiple loan products and shop around on your behalf. Since they typically conduct only one credit check, this approach can help you find the best deal while reducing the number of inquiries on your credit report.

4. Avoid Opening New Credit Accounts

Lenders evaluate your credit profile up until closing. Taking out a new credit card, auto loan, or personal loan while refinancing can impact your credit in multiple ways. A new credit card could increase your utilization ratio (which makes up 30% of your score), while an auto or personal loan could raise your overall debt load, potentially increasing your debt-to-income ratio—something lenders consider when approving your mortgage application.

5. Hold Off on Large Purchases

Big purchases—especially those made on credit—can affect your utilization ratio, which significantly affects your credit score. If possible, delay large expenses until after your refinance is complete to prevent unexpected score fluctuations.

The Bottom Line

Refinancing can temporarily impact your credit score due to hard inquiries and the opening of a new loan account. However, the effects are typically minimal and short-lived, especially when you stay current on all your payments throughout the process.

Ready to explore your refinancing options? Whether you’re looking to lower your rate, reduce your monthly payment, or tap into your home’s equity, start your application with Refi.com today and see what you could save.