What Effect Does Refinancing Your Car Loan Have on Your Credit Score?

Refinancing car loans may provide a positive benefit for individuals who qualify. Taking a formerly high interest rate loan and having an opportunity to reduce the rate allows a borrower to bring down their monthly payments and improve their payment history. The improvement should translate into better credit scores.

The Purpose of Refinancing

Refinancing helps borrowers free up capital that had been used to service their debt and use it to pay other debt obligations. Redirecting money into other bills can help a borrower pay more bills and ultimately eliminate their debt. They can also reduce delinquencies and other issues that have an effect on the borrower’s credit score.

Consult with a Financial Professional about Refinancing

If a borrower takes advantage of a car loan refinance in order reduce their payments, they should consult with a lender or financial professional to determine the net effect of the loan. It may also be helpful for a borrower to review their credit report in order to determine their current credit score and see how a car loan refinance may help them raise that score.

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