But what about your credit scores – does refinancing affect your credit negatively?You’ll probably see a minor impact on your credit scores when you refinance. The whole point of having good credit is to take advantage of the benefits – in particular the ability to get better loans (although it can also help with insurance costs, renting, and job searches).
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After I did some research, I found out that paying off your student loans could actually hurt your credit score. Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life.
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You don’t want to lower your credit scores in that situation because you might end up with a higher interest rate – and you might even get denied.
For example, it doesn’t make sense to save a few bucks refinancing your (relatively small) auto loan if it means you’ll get a higher interest rate on your (relatively large) home loan.
Again, given your situation, you might want to refinance a loan – even if it’ll affect your credit or increase your risk.
You’ll have to evaluate the big picture to decide what’s best.
However, you’ll have to use your own judgment – there might be other situations, and the scenarios below might not really be that bad.
You’re about to apply for a large (or important) loan: if you’re getting ready to ask for an important loan (such as a loan to purchase a home), think twice before refinancing.
So if you’ve got that ability, there are very few reasons not to use it.
At least two situations that come to mind when you might not want to refinance (only one of them is related to a credit score hit).
Installment loans such as student loans are different from credit cards, which are considered revolving credit.