Is There a Potential Credit Score Impact to Car Refinancing?

In the past credit scores were tabulated by three companies, Equifax, TransUnion, and Experian. The problem with these three is that they judge on different merits and scores can be drastically different. To complicate matters there are now smaller credit score companies being used which can make it harder to get a good judgment on your credit.

At least once a month you should check your credit scores to make sure they’re current. A bad score can affect almost everything in your life from buying a home or car to a bank accepting you as a patron. The initial purchase of a home or vehicle is one thing but refinancing is something else altogether. It can be a hard thing to do or a simple thing depending on how up-to-date you are with current payments. For example, if you have a middle to high interest rate you most assuredly can find a lower refinancing package depending on credit scores.

The other aspect to consider is that when you apply for refinancing there will be what is called a “hard inquiry” into your credit history. Each time your credit scores reflect this type of inquiry your score goes down a few points whether you’re approved or not. While the lowering of your scores will last for only two or three months, the record of this lowering in scores will remain on credit reports for one full year. This can be the downside to a potential credit score impact. If you need to borrow money, many credit unions are now offering a chance for borrowers to refinance their card, which will certainly offer better terms than a car title or payday loan which would likely have a higher interest rate or fees.

The upside is that, if accepted, you’ll have lower payments than before, and if payments are made on time it will eventually impact you with a higher scoring. This is why it’s always essential to check your credit scores at least with the top three.

There are many avenues through which you can find a good refinancing package. One is through your car insurance company, even health and life insurance companies carry packages in many cases. Financial institutions such as banks and credit unions continually offer packages for customers who’ve been with them for a certain length of time.

There are a few items to look into before seeking to lower car payments through refinancing. Before proceeding you must get a copy of your credit scores from the top three and make sure any incorrect information is taken care of. This can initially bring your score up before even seeking car refinancing. Remember that for every finance institution you have looking at your scores you will have a lower score for at least three months and that it will reflect on your history for one year. Avoid applying with multiple companies for that reason. Do your research first to make the right decision. Stay tuned to the latest financing news from the team of writers with Signature Loans Network to get the best financing and loan offers in 2014.

Author: Don

Covering the financial markets since 2005. Love to learn and share ideas and tips. The best articles come from ideas presented by users of this website. Topics that we find interesting include personal finance, credit cards (especially awesome balance transfer and rewards cards), small business financing and loans for debt consolidation.