Does refinancing a mortgage hurt your credit?

Core Insights - Refinancing a mortgage can improve a homeowner's financial situation by securing a lower interest rate or reducing monthly payments, but it may temporarily hurt credit scores [1][14] Impact on Credit Score - A hard credit inquiry occurs when applying for a loan, leading to a slight decrease in credit score, typically by less than five points [3][4] - Multiple hard inquiries within a 12-month period can significantly lower credit scores, as borrowers with six or more inquiries are statistically more likely to declare bankruptcy [4] - Shopping for lenders within a 45-day window allows multiple inquiries to be treated as a single inquiry, minimizing credit score impact [5][6] Credit History Length - The length of credit history accounts for about 15% of the FICO score, with new loans potentially lowering the average age of credit accounts [7][9] - Refinancing can close an old mortgage account, which may temporarily reduce the credit score, but the score will recover as the new loan ages [10] Payment History - Payment history constitutes 35% of the FICO score, making timely payments crucial for maintaining a good credit score [11] - Delays in the refinancing process can lead to missed payments on the original mortgage, negatively impacting the credit score [12][14] - Homeowners must ensure all payments are made until the refinancing loan is finalized to avoid credit score damage [13] Overall Effects of Refinancing - While refinancing can lead to cost savings and lower monthly payments, it may also result in a slight decrease in credit scores and incur closing costs [15]