Refinancing a car loan can involve a new credit application and a change to the accounts on your credit report. The effect on a particular score is not something we can predict as a fixed number or recovery period.
Moneysmart explains that scores use information in a credit report, including borrowing, applications and payment behaviour. Your report can show account opening and closing dates and requests made by credit providers. That is a reason to understand the checking process before applying, rather than assuming every quote is recorded in the same way.
Separate comparing from applying
A price enquiry, eligibility discussion and formal loan application can involve different steps. Ask the lender or broker what will happen before you consent:
- Which provider will receive the application?
- Will a credit report be accessed, and what enquiry will be recorded?
- Is this a quote or a formal application?
- Could more than one lender receive a formal application?
- What information is needed before a lender can make a decision?
Do not rely on the words soft check or pre-approval alone. Ask what the actual process does and retain the explanation. Ask for the actual checking and application steps in writing before telling the broker or provider to proceed.
Read your report before guessing the effect
Moneysmart says you can obtain a free credit report every three months. Check the providers, accounts, application information and repayment records. Different reporting bodies may hold different information.
If something is incorrect, use the correction process rather than paying for a promise to erase accurate history. Our credit report correction guide explains how to organise the evidence. A correction request is different from an immediate change to a score or a lender's decision.
Keep the current loan working during the switch
Until the current lender confirms payout and any change to your obligations, continue following its repayment instructions. Ask the new lender or broker for the settlement and payout status instead of assuming the application has closed the old account.
After settlement, retain the old lender's payout or closure confirmation and the new repayment schedule. Check both records for unexplained differences and contact the provider promptly if something does not match.
Compare cost separately from credit-file questions
A lower payment can result from a longer term rather than a cheaper loan. Compare the current payout, exit fees, new fees, remaining term and total future payments. Our debt consolidation worked example demonstrates why these figures matter, even when the new assumed rate is lower.
If you are still deciding whether to switch, use our refinance guide. The useful sequence is to gather the current loan evidence, compare suitable terms, understand the credit-check consent and then decide which application to make. It does not require a promise about how many score points refinancing will cost.
