Here are the facts… when you refinance a loan, we are assuming it is an installment loan and not a revolving loan, because you don’t refinance a revolving loan unless you crashed it and it is closed and they just want their money back. This is a bad thing and just cost you a ton of points. I have seen a revolving loan closed because of bad payments cost up to a hundred points by scheduling a payment program to pay off the loan. So, we are talking only about refinancing installment loans. This will cost you 7 different ways because it will touch upon 7 different scoring “reason codes”.

Reason codes are the codes found on credit reports that a creditor pulls when you apply for credit and explain to them why they don’t want to let you apply for credit because these codes explain the problems associated with your credit report. Guess what, the credit bureaus get a credit fixmycreditsite.com don’t put these on your credit report. We are really curious why not, because it would be really helpful for you if they did. Perhaps they don’t want to help you get a good score? Hmmm… I have my own suspicions.

Ok, back to the problem at hand… refinancing installment loans. When you refinance an old loan into a new one, you have started with a hard inquiry (1), have now lost the history of the old loan (2) and at the same time created a new loan (3). There is no payment history (4) and the credit bureau doesn’t have enough information to calculate a score (5). It has a 100% debt to credit limit ratio (6) and increases your overall debt to credit limit ratio (7). All of these factors will cost your points and lower your credit scores.

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