Does a Refinance Affect Credit Score? What to Expect and How to Prepare for the Coming Months

It’s understandable why property investors and general borrowers may be asking themselves does a refinance affect a credit score. Refinancing is a crucial element of most property investment and homeowner plans.

Those who take out any form of finance for a property investment are unlikely to stay on the same rate throughout its term. Refinancing comes with the territory of property investing, and so borrowers will need to understand its impact.

Does a Refinance Affect Credit Score?

Yes, but only temporarily. Refinancing will result in a hard enquiry on the borrower’s credit report[1]. A hard enquiry is performed when a creditor accesses a borrower’s file to assess their creditworthiness.

These enquiries can stay on a record for up to two years, but can also be cleared within a few months[2]. Hard enquiries will also be applicable for those who are refinancing to consolidate their debts[3].

Generally, refinancing shouldn’t affect credit scores too much. However, should a borrower rate-shop over the course of a few months, a credit score could drop from the multiple enquiries.

Why This Is Important

The question of does a refinance affect credit scores is an important one to address as there is set to be plenty of refinancing over the coming months. The UK mortgage market is expected to be worth £216bn in 2025, according to the ONS[4].  Of this, £58 billion will be dedicated to remortgaging, accounting for 26.9% of the gross market value.

Meanwhile, the Bank of England expects around 31% of all mortgages, or 2.7 million people, to refinance onto a rate of more than 3% for the first time by Q4 2027[5]. The commercial market is also set to see a wave of refinancing activity over the coming months. By mid-2025, some £71bn of commercial property debt will need to be refinanced[6].

Given just how much finance needs to be (or should be) refinanced in the coming months and years, borrowers need to be mindful of their credit records. Scores could take a hit if they’re not careful, albeit perhaps only in the short-term.

What Is Considered a Good Credit Score and What’s the Average for the UK?

Borrowers need to concern themselves with what makes a good credit score, and not just how a refinance affect a credit score. In the UK, there are three main credit reference agencies that securely hold data on the populus, and assign scores. Experian is the biggest, but there is also Equifax, and TransUnion.

Generally, with all the agencies, the higher the number, the better the score. Specifically, anything between 961 and 999 is excellent in Experian’s scoring system. With Equifax, it’s 466-700, and TransUnion is 628-710[7].

Although, it should be noted that there’s no magic number[8] that works for everyone. Lenders will have their own preferences, and a credit score is just one piece of the puzzle. One lender may be more than happy to work with a borrower with an Experian score of 650, while another may not give them the time of day.

Generally, most people in the UK are likely to have a decent score, which they’ll want to protect. In late-2024, the average Experian score in the UK was around 797[9]. The average Equifax score was 644.

Although, scores can vary dramatically across regions, and by age range. In Middlesbrough, for example, those aged between 21 and 25 have an average Experian credit score of 693, sitting in the “poor” range. Whereas those in Mid Sussex who are 55+ have a score of 910, hitting the “good” mark[10].

Impact of Having a Low Credit Score

Broadly, the lower a credit score, the harder it will be to get a mortgage, personal loan, or other form of finance[11]. Where an application is approved, the terms involved could be less flexible, and expensive. Some who work in the legal or financial industries may also see their ability to get certain jobs limited by a bad credit score.

Given how detrimental it could be to see a credit score plummet, borrowers will want to do what they can to limit any damage after a refinance. Ultimately, so long as repayments are made on time, one’s credit score should go back to where it was pre-approval[12].

But, for those who are struggling with a low credit score – temporary or otherwise – the specialist lending market may be able to offer respite. At Market Financial Solutions, we’re happy to hear from borrowers whose credit record may be less-than-ideal. What’s more, we can accommodate bankruptcies, CCJs, insolvencies, and more.

We have refinance funding options for residential, commercial, and business-related investments. We can help property investors get their financial affairs in order, and organise their portfolios.