Does refinancing a mortgage impact your credit rating?

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How does mortgage refinancing affect your credit rating?

Mortgage refinancing affects your credit score because it will take a hit, even temporarily, every time you apply for credit. New debt amount, credit demand, and length of credit history each contribute to this blow. Here is a breakdown of how mortgage refinancing affects your credit score:

Credit investigation. When a lender does a credit check after you submit a credit application for a refinanced home loan (or credit card), it will temporarily lower your credit score. Of your credit score, serious credit inquiries represent 10%. If you fill out a lot of applications in a shorter time frame, this signals to the credit bureaus that you are looking for the best rates. However, completing fewer applications several months apart may be considered separate applications, each of which may result in a brief drop in your credit score.

The average age of your credit history is important. Since mortgage refinancing may appear on your credit report as a new loan, it will lower the average age of credit history. Of your total credit score, the age of your credit history accounts for 15%. A shorter credit history signals to potential lenders and creditors that you lack experience managing credit, even though making payments quickly and building up new credit is good for your long-term credit score. It’s not the most important factor, but it affects your total score.

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