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Does refinancing hurt your credit?
Refinancing a loan can have an impact on your credit, but the extent of that impact largely depends on your individual financial situation and how you manage the refinancing process. As an approachable and trustworthy financial platform, SocietyOne understands that this is a common concern for our Australian customers, and we’re here to break down the implications for you.
When you refinance personal loans, the lender will typically conduct a hard credit check. This is a standard procedure to assess your creditworthiness and determine the terms of the new loan. It can result in a slight, temporary decrease in your credit score. However, the impact is typically minimal, and credit bureaus recognise that borrowers may shop around for better loan terms.
What you can do to prevent your credit score from continuing to be negatively impacted is to ensure that you:
- Make timely payments. Making on-time payments is one of the most crucial factors in maintaining a healthy credit score. Whether it’s your current loan or the refinanced one, ensure that you make all your payments promptly. Consistent, timely payments demonstrate responsible financial behaviour and positively influence your creditworthiness.
- Research and compare. Before proceeding with a refinance, take the time to compare different lenders and loan options. Thanks to SocietyOne’s user-friendly platform, you can easily explore various loan offers and assess how they align with your needs.
- Minimise credit applications. While it’s essential to shop around for the best refinancing deal, avoid submitting multiple loan applications simultaneously. Each formal loan application triggers a hard credit check, which can have a temporary negative impact on your credit score.
- Understand the terms. Before committing to a refinance, thoroughly review and understand the terms and conditions of the new loan. Ensure that you are comfortable with the interest rate, repayment schedule, and any associated fees. Being well-informed will help you avoid any potential issues in the future that could affect your credit.
Make the smarter choice for your refinancing needs and learn more about our personal loans. With us, the better your credit profile, the lower your rate.