How many points does refinancing a car lower your credit score?

It varies by person, but the drop is usually small. The temporary dip typically comes from the hard credit check carried out during your refinance application. This impact often fades within a few months as long as you continue to make payments on time.

Will refinancing your car raise your credit score?

Not straight away. You may see a small dip at first due to the hard credit check and the new account being added to your credit file. Over time, managing the new loan responsibly and making payments on schedule could help your score improve gradually.

Does refinancing a car loan show up as a new loan on your credit report?

Yes. When you refinance, your old loan will show as settled and the refinanced agreement will appear as a new account. Making regular, on-time payments on your new loan could help improve your credit score over time.

Is it better to refinance a car loan before or after improving your credit score?

Improving your credit score before refinancing may help you access better interest rates and more lender options. However, refinancing sooner may still make sense if you urgently need to reduce your monthly payments. Keep in mind that although refinancing can lower your monthly repayments, extending the loan term may increase the total amount of interest payable. Finance is subject to status.

Will refinancing my car hurt my chances of buying a house?

Refinancing could cause a temporary dip in your credit score, which mortgage lenders may see. The new account and recent hard credit search may be taken into consideration. However, if your payments are manageable and you're not taking on excessive debt, refinancing should not prevent you from getting a mortgage. Independent financial advice is recommended for personalised guidance.

How long does refinancing a car hurt your credit for?

Any negative impact is normally short-term, provided you keep up with your monthly repayments. Hard searches remain on your credit report for up to 12 months, but their effect usually fades within a few months. Consistent on-time payments on your new loan help your score recover more quickly.

Will refinancing my car hurt credit?

Refinancing usually causes only a small and temporary drop in your credit score. For many drivers, the benefits of lower or more manageable payments outweigh the short-term dip. Making payments on time afterwards is key to helping your score recover.

Does refinancing a car hurt your credit score?

Written by Louis Rix Updated 07 Jan 2026

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Refinancing a car could be a way of altering your monthly car payments. It may also help you get a better interest rate, particularly if your circumstances have changed since you first took out the agreement.

But, we understand that some people may hesitate to refinance if they have concerns about it potentially impacting their credit score. Credit scores play an important role in car finance so it could be a good idea to understand whether refinancing could set you back.

To help clear up any questions you have, this guide explains the short term and long term credit score impact, and how to weigh up the impact versus the benefits. It also covers helpful tips on how to try and minimise any negative effects.

Will refinancing my car hurt my credit? The short answer

The short answer is yes, refinancing could cause a temporary dip in your credit score. This may happen when lenders carry out a hard credit check, which may impact your credit score. This is when they check your credit file before they agree to lend to you.

But, this is often temporary. And for some drivers, the benefits of refinancing outweigh this brief impact it has on a credit score.

How refinancing a car affects your credit score

So, does refinancing a car hurt your credit, and what actually causes the change?

One factor is the hard credit check carried out during the application. This is recorded on your credit report and may impact your credit score. Hard searches may remain visible on your file for around 12 months and can be seen by other lenders in the future when you take out another loan.

Another factor is the new agreement itself. Refinancing closes your existing loan and replaces it with a new one. The initial impact of taking on new debt could also temporarily affect your score.

But, if you make your payments on time and show responsible borrowing, your score could soon recover and even improve.

You can learn about what credit score is needed for car finance here.

Pros and cons of refinancing a car loan

Like any decision, it’s important to weigh up the upsides and downsides when thinking about how refinancing a car affects your credit and whether it’s worth it for you.

Pros of refinancing a car loan

Improved payment history - If refinancing makes paying your car off easier, it could help improve your credit report. Paying on time, every time, could be a strong way to build your credit score and help show financial responsibility to future lenders.
Lower risk of missed payments - More manageable payments could help take some pressure off your monthly budget. That breathing room may reduce the chances of missing a payment, which could be more damaging to your score.
Opportunity for credit score improvement over time - Although there may be a small dip at the start, keeping up with your new agreement could help your credit score recover and gradually improve.

Cons of refinancing a car loan

Impact of hard credit checks
The hard check could cause a temporary drop in your credit score, even if your credit score is good and you pass the credit check.
Changes to the average age of your credit accounts
Replacing your existing agreement with a new one could slightly lower the average age of your credit history, which could have a minor effect on your score. This is because older accounts may help show good financial management over time.
Risk signals from multiple applications
Applying to several lenders in a short space of time can add up. Multiple hard credit checks may raise questions for lenders. That’s why you may not want to make too many applications that require a hard search at once.
Paying more overall - Please bear in mind that while refinancing may reduce your monthly payments, extending the term over a longer period may increase the total amount of interest payable.

Is refinancing worth it?

In many cases, refinancing could be worth considering. Refinancing may temporarily affect your credit score, but the financial benefits may suit your circumstances. This may also be true if you find a better deal than you currently have.

But, refinancing isn’t always the best choice. If your credit score is very low, you may face higher rates or fewer lender options, reducing the potential savings. Plus, it’s important to think about the short and long term. For example, extending your loan to lower monthly payments may help now, but it can mean paying more interest overall if you extend the term.

You may also prefer to wait to refinance if you plan to apply for a mortgage soon. A small dip in your score or a new credit agreement could impact how lenders see your application.

Read more in our guide on how car refinancing works to ensure you’re making the right decision for you. Our car refinance calculator could also give you a good idea of the sort of deal you might be eligible for.

How to minimise the impact on your credit score when refinancing

Does refinancing a car hurt your credit? Usually only temporarily. And there are a few things you could do to try and keep the impact of refinancing on your credit score as minimal as possible:

Think carefully about timing - You may want to think about the impacts of refinancing before applying for major credit, such as a mortgage. Giving your credit score time to settle could help reduce knock-on effects
Be selective about who you apply with - Consider approaching lenders where you have a realistic chance of approval. Using soft credit checks first could give you an idea of who is likely to accept your application without affecting your score.
Keep the rest of your credit stable - Think about the impacts of taking on new credit commitments while refinancing. It’s also important to make sure you pay your existing loans and bills on time to show refinancing lenders you’re reliable.

What to do after refinancing to protect your credit score

And if you go ahead with refinancing, here are some tips on how you could protect your credit score in the months after:

Make every payment on time - It’s important to make sure you pay your new finance deal on time each month. Setting up a direct debit could make it easier to stay consistent and avoid missed payments.
Check your credit report - Ensure the old loan is marked as settled and the new loan shows the correct details. Mistakes can happen, and spotting them early could make it easier to fix them.
Avoid applying for more credit straight away - Holding off on applying for more loans may give your score a chance to recover. Over time, making reliable payments on your refinanced agreement could outweigh any initial dip caused by the new loan.

Disclaimer: Car Finance 247 Limited is a broker, not a lender. Finance is subject to status and affordability and is not guaranteed. No financial advice is provided. Always read the terms and conditions carefully before applying.