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Is refinancing a car loan bad for your credit?
I’m still able to make payments on my current loan, but it would be a lot easier if I could refinance for a lower monthly rate. I just don’t want to accidentally tank my credit score in the process! Will refinancing my car loan be bad for my credit?
Liz Jenson · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
Finances can be tricky to navigate—especially when loans are involved. But
refinancing a car loan
isn’t usually bad for your credit.Typically, you’ll notice a small dip in your credit score after refinancing—but that should go away within a few months if you keep up with your payments. There are two main reasons for the credit dip:
- Refinancing is the same as taking out a new loan, and you still haven’t proven that you’ll pay it off.
- Most lenders will run a hard credit check before approving your loan. This will usually drop your score up to five points, last for approximately two years. But you can minimize the damage by submitting all your loan applications within a 14 to 45-day window.
Overall, it’s important to remember that the hit to your credit is temporary. As long as you
keep making payments
and keeping up with interest, your credit should recover in no time!To make sure you’re getting the best deal from your lender, try
Jerry
’s auto refinancing feature! A licensed broker, the Jerry app helps users find and compare rates from available lenders in their area. That way, you know you’re getting the lender who best suits your needs.View full answer
- Gregory R.
WHY YOU CAN TRUST JERRY
Jerry partners with more than 50 insurance companies, but our content is independently researched, written, and fact-checked by our team of editors and agents. We aren’t paid for reviews or other content.
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