In the current days, the interest rates are low and the homeowners are thinking about how to refinance the mortgage. However, the question lies is that- does financing will hurt your credit?
In this blog, at the end you will get the answer that whether it will affect your credit or not. Keep reading to know how the refinancing works and what impact it will have on the credit score and what you can do to keep the credit history at the time of the mortgage process.
What Do You Understand By Refinancing?
Refinancing means taking out the new loan for paying off the old one. The new loan will be having better terms like the better interest rates and the different length too. People with the refinancing option want to save money for the future. Though, it is important to know that there are so many loans available for refinancing like the auto loans, student loans and mortgages. The refinancing is the option to take the loan for paying off one credit card with the balance transfer.
How Does The Refinancing Will Impact The Credit?
Now that you know more about the refinancing and how it is working, the next step will be how to learn about its impact on the credit. Does refinancing affect the credit you want? Refinancing the loan will impact the credit and it will do so in just few different ways.
- Check Out For Hard Inquiries
Whenever you ask the mortgage lender for determining whether or not to qualify for the refinance, they will put forward a copy of the credit report. Mainly, the hard inquiries will impact the credit score. The total number of inquiries on the credit report will count for 10% of the FICO score.
- Replacing The Old Credit With New One
The length of the credit history will impact the overall credit score. In such cases, here all are talking about how long you are taking the mortgage. When you refinance, you should close one of the accounts and then replace it with the new ones that end up in shortening the average age of credit accounts.
- Late Or Missed Payments
The last impact that refinancing will have on the credit score is attributed due to the human error. When people takes refinancing loan, they have the tendency to confuse the due dates that will result in the missed payments and have a negative impact on overall credit score.
These are some of the ways you can avoid the impact of refinancing on credit. Want to have mortgage refinance in Vancouver? Consult the broker from Flash Financial who will help you in sorting the issues.