Will refinancing hurt my score?

[Anonymous]

I have been working on building up my credit score, my score is now around 760 and climbing so I've done pretty well.  I bought a new car last year, I still owe just under 20K.  I currently have a 6.74 APR.  I've seen some deals out there where I can get a much better rate and I'm thinking of going for it.  I currently have 2 inquiries on my credit, both from the same bank that I financed my car from in late 2007. 

I want to go to another good bank that I have an affiliation with, USAA, and get a quote from them, then go to the current bank I use (my local credit union) and see if they can beat it.  I assume this will result in 2 additional inquiries, then if I go forward, one loan will be paid in full and a brand new loan will be on my credit.  How will this change my credit score?  I'm looking to buy my first home next year so want to keep it high.

[Anonymous]

That isn't a high APR for starters, it isn't great for a CU, but it is better than many banks offer most consumers so I am not sure how much you would save when you account for any loan fees.

Secondly, here are the factors in play.

Your credit mix points will not change as you will have an open non-mortgage installment loan.

Your average age will drop (an account with 0 age is then averaged into the mix)

An inquiry or two may hurt your score 4-8 point (this drop is in effect for a full year)

You will regain points as your new loan ages, but if a new account lowers your average age significantly I do not recommend making this move in light of a mortgage app next year. If it barely would ding your report you should be fine. You will take a scoring hit, but not much of one and it will likely be mostly gone in a years time.

As 760 is a key number for many mortgage lenders, I would advise you not to make the move. You aren't likely to save that much over the next year and you can refinance your loan after you get a new house.

Goodluck!