Here’s the translation into British English:
Refinancing a Loan: What You Need to Know About Your Credit
Key Points:
- Refinancing can be a great opportunity to change the terms of your loan.
- Applying for loan refinancing can affect your credit, so do your research beforehand.
- Don’t miss any payments while waiting for your refinancing approval.
Refinancing a mortgage has become a popular option in recent times. With refinancing, you take out a new home loan and use it to pay off the balance on your original mortgage. Refinancing can be an excellent opportunity to change the terms of your loan and shorten it. You can also use it to secure a lower interest rate. If interest rates have dropped since you took out your mortgage, refinancing could be beneficial.
Despite the advantages, refinancing could have a negative impact on your credit score. Here are three things you should know about your credit history and credit score before refinancing.
1. A refinance may appear on your credit report as a new loan
When you refinance your mortgage, you are paying off the old loan in full and taking out a new one. The length of your credit history is one of the factors that influence your credit score. If your original mortgage is your oldest account, closing it in favour of a new loan may affect your credit score. However, as your other accounts mature, the impact of refinancing on your credit score will generally lessen.
2. Multiple credit enquiries can affect your credit report
When refinancing, it’s a good idea to compare different lenders to find the best loan terms. Keep in mind that when you apply for a loan, the lender will review your credit history. This results in a “hard enquiry” on your credit report, which can remain there for up to two years. However, hard enquiries typically only affect your credit score for one year.
To reduce the number of hard enquiries on your credit report, research lenders and interest rates before applying. Then, make a shortlist of those you wish to apply with.
Before you start comparing options, obtain a copy of your credit report to understand how potential lenders may view you. These companies use your credit history to help them make lending decisions and assess how likely you are to repay the money borrowed as agreed. Ensure that all the information on your credit report is accurate before applying for refinancing.
Create a myEquifax™ account to obtain free Equifax® credit reports. You can also get free weekly credit reports from , which gathers data from the UK’s three major credit reference agencies: https://policyninja.net/ Equifax®, Experian®, and TransUnion®.
If you find any incorrect information on your credit report, dispute any details you believe to be inaccurate or incomplete.
Here’s the translation into British English:
3. Skipping Mortgage Payments During the Refinancing Process Can Damage Your Credit Score
Refinancing your mortgage may take longer than expected. Do not rely on the process being completed by a certain month. Some borrowers have found themselves in trouble by skipping a mortgage payment, assuming their refinance would go through on time. A missed or late payment can negatively impact your credit score.
The best way to avoid missed payments is to stay in regular contact with your lenders. Set reminders for yourself to ensure you do not miss important due dates. Continue making payments towards your original mortgage until your refinance is fully completed. Remember, payment history is the most significant factor in your credit score. Late payments can remain on your credit report for up to seven years, but their impact lessens over time, especially if it was a one-off mistake.
After refinancing, it may take several months for the new account to appear on your credit report. If, after a reasonable period, the loan does not show up, ensure your lender is reporting your payments to the National Credit Reference Agencies (NCRAs). While the refinancing process may affect your credit score, what truly matters in the long term is how you manage the new loan by making timely payments.