What causes the dip
- Hard inquiry: the lender's full credit check can lower your score by a few points
- New account: a new loan lowers the average age of your accounts
- Old loan closed: your previous mortgage shows as paid in full, which is not a negative mark
Credit before you apply
Your score affects your pricing, so it helps to know where you stand before you start. Pull your free credit reports, look for errors and pay card balances down before the statement closes. Small changes can move you into a better pricing band.
Soft checks vs. hard checks
Not all credit checks affect your score. At CapCenter, pre-approval starts with a soft credit check, which doesn't affect your score. A full, or hard, credit check happens when you move forward with an application.
Shop for rates without worry
Credit scoring models expect people to compare mortgage offers. Multiple mortgage inquiries within a short window are usually counted as one. The window depends on the scoring model, and can range from about 14 to 45 days. Keep your shopping to a few weeks to be safe.
How long recovery takes
Most scores recover within a few months as you make on-time payments on the new loan. Your payment history is the biggest part of your score, so a record of on-time payments matters far more than the inquiry.
If your score drops more than you expect, check your credit reports. A large drop is more likely to come from a missed payment, a high card balance or an error than from the refinance itself. You can dispute errors directly with the credit bureaus.
Protect your score while you refinance
Lenders may recheck your credit before closing, so keep things steady until your loan closes.
- Avoid opening new credit cards or loans
- Keep card balances low
- Keep paying your current mortgage on time, even if it will be paid off soon
- Don't close old credit card accounts right before closing
Timing around other big purchases
If you plan to finance a car or another big purchase, think about the order. Applying for other credit during a refinance can change your debt-to-income ratio and complicate approval. After closing, giving your score a few months to recover can help with your next application.
CapCenter refinances come with ZERO Closing Costs (restrictions apply). You need a credit score of at least 620 for a CapCenter loan.
