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Posted in Auto Loans
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Question By
everylilbithelps

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Will refinancing my current auto loan to reduce my apr lower my current credit score?

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Yes, you are closing a account and opening a new account and your new account will have high balance to the loan amount, and new inquiry(s) dosent help your scores either. However I wouldn't let the lowering my scores prevent me from paying less interest. You have to weight your own cost-benefit, just for example, would at cost of 10 points out weights paying 5% less interest?

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I don't know for sure, but I will offer an educated guess. I think it would hurt your score for two reasons:
One, it would be a brand new loan. Obtaining new credit of any kind nearly always causes an initial dip in score.

Two, the amount still owed compared to the amount paid will revert back to a lousy ratio. With any loan, the closer you are to having it paid off the more it helps your credit score. Until you pay it off, that is--then your score drops. 

What's good for your budget is frequently in conflict with what's good for your credit score, unfortunately. 

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Reply by
Krissie72

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Oh, and when you refinance, your old loan is paid off. There's yet another reason for your credit score to drop a few points.

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