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@Anonymous wrote:
Planning to refinance our mortgage, with cash out to pay off a student loan... since I'll be replacing 2 much older loans (our existing mortgage and student loan) with a new loan, should I be concerned about impact to my FICO score? Thanks!
Your older loans will persist on your credit profile for several years after they've been paid off, and will be positive factors for your score. Your new loan might have an initial negative impact, for the inquiry and the for the new account. As soon as you start making on-time payments, your score will improve. I had a short-lived drop of about 15 points last summer when I refinanced a mortgage loan. It came back up by the exact same amount in less than a month.
You can't buy gas and groceries with FICO points. If refinancing your loans is going to save you money, then it is the right thing to do.
One other comment - what is the balance of your student loan? Be really careful about converting your unsecured debt into secure debt. By doing this cash-out refinance, you are collateralizing your student loans with your home. If for some reason you are not able to make the new and higher mortgage payments and default, then your home is at risk.
@Anonymous wrote:
Planning to refinance our mortgage, with cash out to pay off a student loan... since I'll be replacing 2 much older loans (our existing mortgage and student loan) with a new loan, should I be concerned about impact to my FICO score? Thanks!
Your older loans will persist on your credit profile for several years after they've been paid off, and will be positive factors for your score. Your new loan might have an initial negative impact, for the inquiry and the for the new account. As soon as you start making on-time payments, your score will improve. I had a short-lived drop of about 15 points last summer when I refinanced a mortgage loan. It came back up by the exact same amount in less than a month.
You can't buy gas and groceries with FICO points. If refinancing your loans is going to save you money, then it is the right thing to do.
One other comment - what is the balance of your student loan? Be really careful about converting your unsecured debt into secure debt. By doing this cash-out refinance, you are collateralizing your student loans with your home. If for some reason you are not able to make the new and higher mortgage payments and default, then your home is at risk.