How Does Refinancing Affect My FICO® Score?
Refinancing and loan modifications can affect your FICO Score in a few areas. How much depends on whether it's reported to the credit bureaus as the same loan with changes or as an entirely new loan.
If it's reported as the same loan with changes, three pieces of information associated with the loan modification may affect your score:
- the credit inquiry
- changes to the loan balance
- changes to the terms of that loan.
Overall, the impact of these changes on your FICO Score should be minimal.
If it's reported as a "new" loan, your score could still be affected by the same three factors above along with the additional impact of a new "open date."
A new or recent open date typically indicates that it is a new credit obligation and, as a result, can impact the score more than if the terms of the existing loan are simply changed.
Knowing if refinancing will have a positive or negative effect on your credit score can be tricky. So take it slowly and ask your lender as many questions as you can think of. And keep an eye on your credit report before, during and after the refinance process. This will help you make the right moves in the future.