Does Refinancing a Loan Hurt Your Credit Score? - YouTube

so I get a lot of questions on the channel regarding refinancing a loan and

what it's going to do to their credit and this is a big deal because I've

actually seen people where they have car loans for let's say 6% interest and then

they get pre-approved for 3% but they don't want to go ahead and take that new

loan because they're worried that it's gonna hurt their credit score and this

is a big problem because going from 6% to 3% is going to save you so much money

especially at the Oh a lot of money on your car and it really has nothing to do

with having your credit score dinged because eventually your credit score is

going to go back up so that's exactly what this video is gonna be about it's

gonna be about what exactly happens when you refinance alone and what happens to

your credit score when you actually have your credit pulled when you get a new

loan so the biggest point that I want to get across when it comes to your credit

score is that the main purpose of your credit score is to get the best rates

possible whenever you're borrowing money or when you're getting credit cards and

everything like that so your credit is used to borrow money

for the best price possible and that is the entire purpose of it so if your

score goes down just a little bit because you're getting a new loan who

cares because the whole point is to borrow money for as cheap as possible so

in my opinion if you have a current loan that doesn't have that great of a rate

and your credit score has gone up then I would definitely consider doing a

refinance even if it's going to hurt your credit score just a little bit

because eventually your credit score is gonna go back up and that's what we're

gonna talk about next is exactly what happens to your credit score whenever

you refinance or get a new loan so basically the way it works is that every

single time you apply for a new credit card or you apply for a new loan you are

gonna have to have your credit checked and this is the big type of a credit

check this is what's called a hard pull and this does affect your credit score

but it's really not that big of a deal and there's no way around it because if

you happen to be shopping for a new car or maybe a new house or you just want to

get another credit card there is no way around it your credit has to be checked

in order to be approved for those loans and when you have your credit checked as

a hard pull it does affect your credit score but the way that your credit score

works is it's actually a bunch of different categories and all of those

categories have different weight on your credit score so some of them are

considered high impact there's are considered low-impact and

whenever you have your credit checked it's under the new credit category which

only applies to 10% of your entire credit score so this is low-impact and

it's not a big deal so even if you have your credit checked and even if it digs

your credit just a little bit it's just not gonna be that big of a difference on

your overall credit score and eventually it is gonna go up over time and another

thing to keep in mind is that whenever you have a hard pull you can actually do

this one to two times every two years in order for it to really not affect your

credit score because they consider it good if it's one to two times and then

if it's more than that it tends to go down just a little bit but every two

years it pretty much resets so that you can get new loans new credit cards and

it really doesn't affect your school and then also keep in mind that for instance

if you're looking for a new car loan and you happen to go to a bunch of different

banks and have your credit pulled at each of those banks because you're

trying to find the best loan possible as long as you checked all of that within

14 days that can actually count as just one inquiry on your credit and that is a

big deal because then you can go to all of those different banks and you can end

up with the best loan and those hard pulls are gonna only count as one and

that's exactly what you want but it's not guaranteed but that is what they say

is that you have 14 days to do that and as long as you do that within 14 days

because your car shopping or house shopping whatever then it's just gonna

count as one so just remember at the end of the day if you want to refinance

alone and you are gonna get a better rate then it's definitely worth having

your credit checked and having your credit score go down just a little bit

to get that money at a better price because at the end of the day remember

your credit score the whole point of it is to be able to borrow money for the

most affordable price possible that is the whole point of your credit so take

advantage of that and get better loans whenever you can because if you are

gonna save money then at the end of the day you have more money in your wallet

and you can obviously do something else with it

now if you just found this channel I'm Jason with honest finance and I make a

lot of videos on different topics that'll give your life and your finances

more value so if you do have an interest in this type of content feel free to

subscribe but thank you guys for watching this particular video have a

great day