Is refinancing a car loan bad for your credit?

I’m still able to make payments on my current loan, but it would be a lot easier if I could refinance for a lower monthly rate. I just don’t want to accidentally tank my credit score in the process! Will refinancing my car loan be bad for my credit?

Answer
Finances can be tricky to navigate—especially when loans are involved. But refinancing a car loan isn’t usually bad for your credit.
Typically, you’ll notice a small dip in your credit score after refinancing—but that should go away within a few months if you keep up with your payments. There are two main reasons for the credit dip:
  • Refinancing is the same as taking out a new loan, and you still haven’t proven that you’ll pay it off.
  • Most lenders will run a hard credit check before approving your loan. This will usually drop your score up to five points, last for approximately two years. But you can minimize the damage by submitting all your loan applications within a 14 to 45-day window.
Overall, it’s important to remember that the hit to your credit is temporary. As long as you keep making payments and keeping up with interest, your credit should recover in no time!
To make sure you’re getting the best deal from your lender, try Jerry’s auto refinancing feature! A licensed broker, the Jerry app helps users find and compare rates from available lenders in their area. That way, you know you’re getting the lender who best suits your needs.
Liz Jenson
Answered on Nov 20, 2021
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