Will Refinancing Hurt My Credit?

Key Takeaways

• Checking your student loan refinancing rate with LendKey uses a soft credit inquiry, which does not affect your score.
• A hard inquiry occurs only when you apply for the actual loan and typically lowers your score by only a few points.
• Refinancing may temporarily lower your credit due to a new account opening but can improve credit over time through on-time payments.
• Refinancing can help borrowers avoid missed payments or defaults—events that have a far greater negative credit impact.

There’s no denying that building and maintaining a strong credit history and score will benefit you in many ways. With a good credit score, you can take out credit cards, a mortgage, and an auto loan at low interest rates. As such, most people shy away from any actions that may harm their score. However, there are times when you’ll want to make financial changes, such as refinancing, that will result in a short-lived “ding” to your credit but will be beneficial to your financial health and credit standing in the long run.

For example, refinancing a student loan may temporarily affect your credit score, but it will be minimal in most cases. When your credit is accessed by a lender, it is considered a “hard inquiry”. Hard inquiries may lower your score by a few points. However, credit scores are affected by how many inquiries are made in a set period of time. So, if this is the only inquiry you have, the impact will be minor and will fall off over time, provided you don’t continue to apply for additional loans or lines of credit.

Soft Pull vs Hard Pull: What’s the Difference?

Soft credit inquiry*:

• Used for prequalification
• Allows you to check rates without affecting your credit score
• Visible only to you

Hard credit inquiry:

• Occurs when you officially submit a loan application
• May lower your score by a few points
• Impact fades quickly if you avoid multiple, clustered applications

*LendKey provides rate checks using a soft inquiry, helping borrowers compare refinancing options without credit risk.

Your credit may also be impacted depending on whether you have consolidated student loans or applied for an entirely new loan. If you’re closing an old loan and opening a new one, you may see your credit score decrease initially as a new loan has no credit history and may shorten your average account age. A new loan will also be added to the total number of accounts you hold, which can affect your credit score.

With all that said, as long as you continue to make all payments on time, and refrain from opening other credit card accounts and making large purchases, refinancing your student loans should have a minimal impact on your credit. And remember, defaulting on a student loan can have a devastating impact on your livelihood, resulting in actions taken against you such as garnishment of wages and/or interception of tax refunds. Likewise, defaulting on a loan can make it extraordinarily difficult to obtain other loans in the future. So, if you are struggling to make your student loan payments, remember that the minor and short-lived impact on your credit as the result of refinancing is nothing compared to the serious ramifications you may experience from missing payments or defaulting on loans.

If you’re ready to refinance your student loans, we have a variety of student loan refinancing options that may help you simplify your finances, lower your payments, and save a substantial amount of money over the long-term.