Refinancing does affect your credit, and the damage is smaller than the paperwork suggests. A single mortgage inquiry costs most people fewer than five points. Inquiries make up 10% of a FICO Score, and they stop counting after twelve months.
The part nobody warns you about is the age of your accounts. You aren’t modifying a mortgage when you refinance. You’re closing one loan and opening another.
How many points does refinancing cost you?
Fewer than five, for most people. FICO reports that one additional inquiry takes less than five points off a typical score, and that inquiries account for only 10% of how the score is built.
Two things soften it further. If you apply with several lenders, FICO groups those inquiries into one as long as they land inside the same window: 14 days on older scoring models, 45 days on newer ones. And for mortgage inquiries specifically, FICO ignores anything from the previous 30 days when it calculates your score.
Shop inside a month and the inquiry is invisible while you’re still shopping.
Does refinancing restart your loan?
Yes, and that is the real credit event. It isn’t the inquiry.
A refinance pays off your existing mortgage and replaces it with a new account dated today. The old loan closes. The new one has no payment history. Average age of accounts is part of how a score is calculated, so a fifteen-year-old mortgage disappearing and a one-month-old mortgage appearing in its place moves that number more than the inquiry ever did.
The effect is temporary and it corrects itself with payments. It also explains why some people see a bigger drop than the “under five points” number predicts and assume something went wrong. Nothing went wrong.
Does refinancing cost money?
Yes. A refinance carries closing costs in the same categories you paid the first time: lender fees, the appraisal, title work, the closing attorney, and prepaid taxes and insurance into escrow. Our breakdown of what closing costs include in Georgia applies to a refinance the same way it applies to a purchase.
Those costs can be rolled into the loan balance. Rolling them in is not the same as avoiding them. You’re financing the fee for as long as you keep the loan.
If you’re refinancing mainly to drop mortgage insurance, check first whether you can cancel PMI without refinancing at all.
How long does the credit hit last?
Twelve months for the inquiry, and less than that in practice.
Hard inquiries stay visible on your credit report for two years, but FICO Scores only consider them for one. The account-age effect takes longer, because there’s no shortcut for a loan being old. Every on-time payment on the new note works in the other direction.
| What happens | Effect on your score | How long it lasts |
|---|---|---|
| Hard inquiry | Usually under 5 points | Counted 12 months, visible 24 |
| Several lender inquiries in one window | Counted as a single inquiry | 14 days (older models), 45 days (newer) |
| Old mortgage closes | Average account age drops | Recovers as the new loan ages |
| New mortgage opens | No payment history yet | Builds from the first payment |
| Loan balance changes | No effect on utilization | Mortgages are installment debt, not revolving |
When does refinancing actually hurt you?
When you do it while you’re also financing something else.
Here is the version that costs real money. A homeowner refinances in March, applies for a car loan in April, and lands at the bottom of a pricing tier because of a temporary dip. Same borrower, same income, worse terms, for a reason that had nothing to do with the house.
If another purchase is coming, sequence them. Do the one that matters more first and let the other wait ninety days.
We refer our clients to a mortgage broker who can run the actual numbers on your file. You are free to work with any lender you choose.
Whether a refinance makes sense is a payback question, not a credit question: what it costs, what it saves each month, and how long you plan to keep the house. Credit turns out to be the smallest variable in that equation, which is an odd thing to discover after worrying about it for three weeks.