Will Refinancing a Car Hurt Your Credit?

Refinancing a car can hurt your credit temporarily, but your score should bounce back.

Bev O'SheaAugust 18, 2020
On a similar note...
On a similar note...
Will Refinancing a Car Hurt Your Credit?

Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own.

Refinancing a car can save you money on interest or give you a lower payment and some breathing room in your budget.

When you refinance a car loan, it could temporarily ding your credit score, but it’s unlikely to hurt your credit in the long run.

Know where your credit stands

Check your credit score for free. Your info updates every week to help you track your progress.

Why refinancing can lower your credit score

When you apply for credit, the lender typically checks your credit. That causes a hard inquiry to be noted on your credit, which can cause a temporary dip in your score. The effect of a hard inquiry typically disappears in six months.

Car loan inquiries typically are bundled as a single inquiry if they're done in a compact time frame. For that reason, it's smart to do your loan shopping relatively quickly. VantageScore gives you a rolling 14-day period; FICO gives you 45 days.

A car loan refinance also might hurt your credit by reducing the average age of your accounts. That’s because your original car loan will be paid off early and replaced by a new auto loan. But that’s a relatively small element among the factors that affect your credit score.

How to prepare to refinance your car loan

Find out where you stand. Checking your credit does not hurt your score and gives you an idea of how lenders will size you up. The scores used for car loans are unlikely to be precisely the ones you see online or on credit card statements: Auto-specific scores typically give more weight to how you’ve made car payments in the past and are often on a scale of 250 to 900, rather than the 300 to 850 of most other FICO scores.

Check your credit reports and fix errors. Now is a good time to check your credit reports closely, making sure there are no errors that could keep your credit application from being approved at the best rate you can qualify for. If there are errors, you still have time to dispute them.

We want to hear from you and encourage a lively discussion among our users. Please help us keep our site clean and safe by following our posting guidelines, and avoid disclosing personal or sensitive information such as bank account or phone numbers. Any comments posted under NerdWallet’s official account are not reviewed or endorsed by representatives of financial institutions affiliated with the reviewed products, unless explicitly stated otherwise.