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Level 1

After refinancing home mortgage

My credit score went down 51 points after refinancing my home mortgage. Is this to be expected?

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Level 15

After refinancing home mortgage

Some level of decline is to be expected, particularly if several hard inquiries were made in the process.

 

You should review your credit reports, which you can get free from the site below, for accuracy.

 

https://www.annualcreditreport.com/index.action

 

You might also want to check your credit score with Turbo --> https://turbo.intuit.com/

 

The Experian site below has further information.

 

https://www.experian.com/blogs/ask-experian/does-refinancing-a-personal-loan-hurt-your-credit-score/

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Highlighted
Level 15

After refinancing home mortgage

Some level of decline is to be expected, particularly if several hard inquiries were made in the process.

 

You should review your credit reports, which you can get free from the site below, for accuracy.

 

https://www.annualcreditreport.com/index.action

 

You might also want to check your credit score with Turbo --> https://turbo.intuit.com/

 

The Experian site below has further information.

 

https://www.experian.com/blogs/ask-experian/does-refinancing-a-personal-loan-hurt-your-credit-score/

View solution in original post

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Level 15

After refinancing home mortgage

That's completely normal.  Remember that your credit score is just a crude way of evaluating your credit worthiness for your next loan.  Presumably you aren't applying for a new loan right after refinancing.

 

Refinancing does a number of things that all will lower your score, at least temporarily:

  • one or more "hard" credit checks on your file
  • opening a new loan and increasing your total debt
  • paying off and closing an old loan, because it may decrease the average length of your credit history, and it also decreases your apparent borrowing power.

The hard credit checks will drop off your report in 2 years.  As you make payments on the new loan, it will get older (longer credit history= good), your total debt will go down (good) and your total debt as a percentage of your borrowing ability will go down (good).

 

(Somewhat bizarrely, having a $100,00 mortgage balance on a loan that started out at $150,000 a few years ago, is better for your score than paying off that loan and replacing it with a brand new $100,000 loan.)

*Answers are correct to the best of my ability but do not constitute legal or tax advice.*
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