How to Refinance a Car Loan Without Hurting Your Credit

Refinancing your auto loan can be a smart financial move that lowers your interest rate or monthly payment, saving you money. But here at our BMW financing center at BMW of Wesley Chapel, our experts often get questions about how refinancing affects credit scores. While applying for any new loan has a minor impact on your credit score, you can refinance smartly to protect your credit score. This is an overview of how refinancing affects your credit.

The Hard Inquiry

When you apply to refinance your BMW loan, lenders will perform what is known as a hard inquiry on your credit report. This inquiry can cause a small, temporary dip in your score, which is a normal aspect of applying for any new line of credit. If you shop for your new loan correctly, this minor impact is often short-lived.

Shop Within a Short Timeframe

Credit scoring models are smart, and they realize that buyers shop around for the best rates on a major purchase like a car loan. They typically treat multiple auto loan inquiries made within a short period (typically 14 to 45 days) as a single event. As a result, one of the best credit preservation tips is to do all your rate shopping and submit your applications within a two-week window. This reduces the number of hard inquiries on your credit score.

Make Your Payments on Time

The temporary dip from a hard inquiry is more than balanced out by the long-term benefits of paying back your loan on time. Once you secure your refinanced loan, every on-time payment will build a positive credit history. At the end of the day, a well-managed loan that was refinanced will be a net positive to your credit score.

Get BMW Financing Support in Wesley Chapel, FL

At BMW of Wesley Chapel, our BMW financing experts are happy to answer all your questions about auto loans. If you have questions about your current loan, don’t hesitate to reach out to our team!