Worried that shopping for a lower car payment will wreck the credit score you worked hard to build? Here is the reassuring part. Refinancing a car can ding your score by a few points at first, but the effect is usually small and short-lived.
Does Refinancing a Car Hurt Your Credit?
Yes, but only a little, and usually not for long. When you apply, the lender runs a hard credit check, and opening a new loan resets the age of that account. Both can nudge your score down by a handful of points.
For most people the drop is minor. If the new loan lowers your interest rate or monthly payment, that trade-off is often worth a temporary dip, which is really a question of when a refinance is worth it.
Why Your Score Dips at First
Two things happen when you refinance. First, a lender pulls your credit to price the loan, which counts as a hard inquiry. A single hard inquiry may lower your FICO score by up to 5 points, and often less.
Second, your old auto loan closes and a new one opens. That can shorten the average age of your accounts, which is one factor in your score. On its own, the change is usually small.
Hard Pull vs. Soft Pull
Not every credit check counts against you. Prequalifying for a refinance often uses a soft pull, which does not affect your score. The hard pull comes later, when you formally apply.
| Type of check | Affects your score? | When it happens |
|---|---|---|
| Soft pull | No | Prequalifying or checking rates |
| Hard pull | Yes, by a few points | Submitting a full application |
Checking your own credit is always a soft pull, so reviewing your report before you shop costs you nothing.
Rate Shopping Windows Work in Your Favor
Credit scoring models expect you to compare offers. FICO groups auto loan inquiries made within a 14-day window into a single inquiry. VantageScore gives you up to 45 days. So applying to several lenders during a short stretch usually counts as one hit, not many.
That is why it pays to do your rate shopping in a tight window rather than spreading applications over months.
How Long the Dip Lasts
A hard inquiry can stay on your report for up to two years, but it typically only affects your score for about 12 months. The account-age change fades too. With steady, on-time payments on the new loan, many people see their score return to where it was within a few months.
A Smarter Way to Shop
The cleanest way to protect your credit is to compare several lenders in one short inquiry instead of applying one by one.
To do that without filling out separate applications, a refinance service like iLending shops a network of 60+ lenders and works with credit scores as low as 560, which helps keep hard pulls to a minimum. Terms apply; APRs vary by creditworthiness.
Compare the Full Market
If you want to see refinance quotes next to new and used car loan options, an online marketplace can pull several offers side by side.
A marketplace like myAutoloan connects you with 20+ lenders and covers refinance, private-party, and lease-buyout loans, so you can compare terms before any hard pull. Terms apply; APRs vary by creditworthiness.
myAutoloan
myAutoloan
Find the right auto loan in minutes — even with bad credit. myAutoloan connects you with 20+ lenders to compare personalized offers for new cars, used cars, refinancing, and lease buyouts. Free to use with no obligation.
Standout feature
Compare offers from 20+ lenders. Works with bad credit. BBB A+ rated.
Fees
Free
Pros
Free to use with no obligation. Works with all credit types including bad credit. BBB A+ accredited.
Cons
Some users report receiving calls from multiple dealers after applying.
Frequently Asked Questions
How many points will refinancing drop my credit score?
Usually just a few. A single hard inquiry may cost up to 5 points, and the new account can shave a little more off your average account age. Most people recover within a few months of on-time payments.
Does refinancing a car hurt your credit more than the original loan?
Not really. The credit impact is similar to when you first financed the car, a hard pull plus a new account. If anything, a lower payment can make it easier to stay current, which helps your score over time.
Will checking my refinance rate hurt my score?
Checking a rate through prequalification is typically a soft pull, which does not affect your score. The hard pull only happens when you submit a full application to a lender.
How soon after refinancing will my score recover?
Many people see their score bounce back within three to six months, assuming they pay on time. The hard inquiry stops affecting your score after about 12 months, even though it stays visible for up to two years.
