Will refinancing my car cause a score drop??? Advice?

[juleslanr]

I am in the process of a home purchase.. but we have 4 more months to reconfirm my credit and it HAS to be at 640. It is at 640 now and we were approved this week!! My debt income ratio is REALLY tight so it would help me to refinance my van. It was at a 25% interest because I had a 500 score when we got it    If I refinance it, will it cause my score to drop with the new tradeline?

[pizzadude]

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@juleslanr wrote:

I am in the process of a home purchase.. but we have 4 more months to reconfirm my credit and it HAS to be at 640. It is at 640 now and we were approved this week!! My debt income ratio is REALLY tight so it would help me to refinance my van. It was at a 25% interest because I had a 500 score when we got it    If I refinance it, will it cause my score to drop with the new tradeline?

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It's likely to cause a score drop ~ if you're applying for a mortgage it's not a good time to take out a new loan or open a new CC. 

The inquires will likely lower your score, and there could be a possible drop in AAoA due to a new tradeline.

If you're this close to the 640 cutoff I wouldn't refi right now.   Wait until after you close.

[steeler68cad]

Agreed do not REFI right now once you have the house loan showing that should help your credit and can maybe get a better rate.

[juleslanr]

Thanks for the advice!!!! I feel better now about waiting.

[user5387]

Refinancing means a new loan, and the associated costs are a hard pull, new tradeline, and reduced AAoA.

The impact of these things varies with the starting score, thickness of the file, and so on.

[Revelate]

The salient question: does your current DTI kick you over a limit where the lender won't do the loan with you?  

If your loan agents are stating you're stuck on the DTI calculation, that could be problematic; otherwise if you can still qualify for the mortgage without the refinance, I'd absolutely hold tight till post closing as everyone is recommending.

ETA: other than no files and thinnish files that don't have many tradelines, adding another tradeline is never a positive, Amex backdating not withstanding on an AAoA gimmick: the actual inquiry and new tradeline are always a negative, might be 0, but never a positive on someone with a typical thick file from a FICO perspective.  Being on the bubble, I'd sit on my hands unless I had to refinance for financial reasons... if no house, I'd say go refinance now, but in mortgage process with a score on the margin, no bueno.