The Quick Read: Usually only a little, and only for a while. The credit check and the new account can trim your score by a small amount at first. For many homeowners that dip fades. What you do with the cash matters more than the loan itself.
What Gets Reported When You Close a Cash-Out?
Four things change on your credit report. The lender pulls your credit, which adds an inquiry. A new mortgage account opens. Your old mortgage is paid off and shows as closed. And your balance changes, because a cash-out loan is larger than the one it replaces.
Across the wholesale programs Lendmire places files with, a conventional cash-out refinance program replaces your first mortgage with a new, larger one. You keep the difference as cash. Because one installment loan replaces another, your credit mix does not change. Your payment history also carries over, since the old loan closes in good standing.
FICO weighs five factors. Here is how a cash-out touches each one.
| Score factor | Weight | What a cash-out does |
|---|---|---|
| Payment history | 35% | Neutral if every payment is on time |
| Amounts owed | 30% | Mortgage balance rises; card balances may fall |
| Length of history | 15% | New account lowers average age |
| New credit | 10% | One inquiry plus one new account |
| Credit mix | 10% | Mostly unchanged |
Only two rows push your score down: new credit and average age. Both are small effects. Experian notes that paying off or closing a loan caps its payment history but does not cancel its age at once. So the old mortgage’s years do not vanish the day it pays off.
No official source gives an exact “points lost” figure for a refinance. Many consumer sites quote a range, but that is a rule of thumb. Plan for a small, temporary dip and leave it there.
Does How You Spend the Cash Change the Outcome?
Yes, and it is the biggest swing factor. The loan itself is a small event. The cash you pull out can move the “amounts owed” factor in either direction.
| How the cash is used | Likely effect on score | Why |
|---|---|---|
| Pay off credit cards | Often a lift | Utilization drops sharply |
| Pay off an auto loan | Mild lift | Fewer installment balances |
| Home improvements | Roughly neutral | Debt moves to the mortgage; no card change |
| Spending, with cards unchanged | Small dip, no offset | New account and inquiry with no payoff benefit |
| Pay off cards, then run them up again | Gain reverses | Utilization climbs back |
Picture a homeowner with several cards near their limits. Paying them to zero at closing can lower utilization fast, and that is a common reason scores rise after a cash-out. Utilization is the share of your available card credit that you are using.
Here is the catch. You have swapped unsecured card debt for debt secured by your home. If the cards fill up again, you carry both. Fannie Mae’s rules also say revolving accounts paid to zero at closing may stay open, per its 2015 selling-guide announcement. A lender can still add its own condition. Keeping the cards open helps your available credit, but it also leaves the temptation in place.
Do Multiple Lender Checks Hurt More?
No, as long as you shop inside one tight window. The CFPB explains that mortgage inquiries made within about 45 days of each other count as a single inquiry. The same guidance says one inquiry typically has a small negative effect, and that you cannot avoid inquiries when you apply for a mortgage.
The window varies by scoring model. Older FICO versions group inquiries over a 14-day span. Newer versions use 45 days. Each lender picks which version it pulls. So the safe habit is to keep all your mortgage quotes inside roughly two weeks.
Three more details help:
- General questions about pricing do not trigger a credit pull. A lender pulls your report when you apply.
- An auto loan inquiry counts separately from mortgage inquiries, because they are different loan types.
- Other new credit during the process adds risk. Hold off on store cards and car financing until you close.
What Does the Data Show for Cash-Out Borrowers?
The best evidence is a CFPB study of cash-out borrowers. It found an initial sharp improvement in credit scores, then a gradual worsening. Scores generally stayed above their pre-refinance levels. Borrowers often used the money to pay down credit card and auto debt.
The same release carries two warnings. Card balances and usage trended back toward earlier levels within a year. And paying non-mortgage debts with mortgage debt can raise the risk of foreclosure. The cash-out lowers your score pressure, but it also puts your home behind more of your debt.
Individual results vary. Your outcome depends on your starting score, your card balances, and what you do after closing.
Where Does Your Score Actually Cost You?
The bigger effect is often on pricing and eligibility, not on the score dip itself. Your credit score and your loan-to-value ratio (LTV, the loan as a percentage of the home’s value) both feed into the price of a cash-out. Fannie Mae’s Selling Guide says a loan-level price adjustment applies to certain cash-out refinances based on LTV and credit score. In plain terms, a higher score can mean a lower cost of borrowing. Lower scores can mean a higher one. These adjustments change over time, so ask a loan officer how your score tier affects your price.
Here are the program limits that frame the decision, subject to lender guidelines and full file review:
- Leverage: 80% LTV on a one-unit principal residence. Two- to four-unit principal residences, second homes and investment property top out at 75%. Occupancy decides the cap. Fannie Mae’s Eligibility Matrix shows the same direction by unit count.
- Seasoning: The mortgage you are paying off must be at least 12 months old, counted note date to note date. At least one borrower must also have been on title for 6 months. Exceptions exist for delayed financing, inheritance and legal awards.
- Credit floor: Wholesale conventional programs start at a 620 decision score. The automated finding governs most files, with a total debt-to-income ceiling of 50%.
- No-mortgage-insurance lane: One wholesale lane reaches 89.99% LTV with no mortgage insurance. It needs a 680 score, a 50% ratio, a thirty-year fixed rate and a primary residence at a conforming balance. It carries its own six months of seasoning.
Mortgage insurance matters too. Above 80% LTV it is generally required, though one wholesale lane reaches 89.99% LTV without it. You can request cancellation at 80% of the original value with good payment history. The servicer must end it automatically at 78%. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
If you want to see where your score lands, Lendmire’s piece What Is The Minimum Credit Score For A Cash Out Refinance breaks down the tiers. Some lenders also set a higher floor than the base program, so a score that works at one lender may not at another.
How Long Does a Score Dip Last?
Most of the effect is short. The inquiry’s weight fades as time passes. The new account’s age grows with every month you pay on time. Here is a general picture, not a promise.
| Stage | What is happening | Score direction |
|---|---|---|
| Before you apply | Score steady; you check your reports | No change |
| Application | Inquiry posts; shopping groups together | Small dip |
| Closing | Old loan closes; new loan opens; cards may be paid down | Mixed; payoffs can lift |
| First months | New account is young; balances settle | Small dip or flat |
| After a year of on-time payments | Inquiry fades; account ages | Often back to or above start |
The pattern in the CFPB study fits this picture. The early change is the sharpest, and scores then ease toward the longer-run level. Missed payments are the exception. Payment history is the largest factor, so one late payment can outweigh everything above.
How Do You Protect Your Score Before, During and After?
Keep the dip small with a few habits.
Before you apply
- Pull your credit reports and fix errors. Mistakes are easier to dispute before you apply.
- Pay card balances down if you can. Lower utilization helps your score and your price.
- Hold off on new credit, such as a car loan or a store card.
During the process
- Request every quote inside a tight window of about two weeks.
- Keep paying your old mortgage on time until the payoff is confirmed. A payment missed in the handoff can post as a late payment.
- Answer document requests promptly. Lenders may check credit again just before closing, so a new account in between can change the file.
After closing
- Confirm the old mortgage shows as paid and closed.
- Confirm the new loan shows the correct balance and payment date.
- Dispute anything wrong with the credit bureau.
- Set up automatic payment so the first payment is on time.
- Keep card balances down. The CFPB study found balances drift back up for many borrowers.
How Does a Cash-Out Compare With Other Ways to Borrow?
The credit mechanics differ by product. A rate-and-term (limited cash-out) refinance has the same inquiry and new-account effect. It pays off your first mortgage and closing costs with only incidental cash back, so the balance barely changes. On a one-unit primary residence, that lane reaches 95% LTV, versus 80% for a cash-out. That higher leverage can matter if you only want to change your loan terms. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
A second mortgage or home equity line adds an account without replacing your first mortgage. That adds a second payment and keeps your existing loan’s age intact. A personal loan adds an installment account with no home as collateral. Each product has its own price and risk, so compare the total picture instead of the score effect alone. If your current loan is FHA, Lendmire’s article on whether an FHA-to-conventional cash-out refinance needs better credit (Does an FHA-to-Conventional Cash-Out Refinance Need Better Credit?) covers the extra step.
Is It Worth It?
Weigh the temporary dip against what you gain. A cash-out can make sense when the cash replaces higher-cost debt or funds a project that adds value, and you have a plan to keep balances down. It makes less sense when the cash covers spending that will repeat, or when the move leaves you with less equity cushion than you want.
Ask three questions. Will I use the cash for a defined purpose? Can I carry the new payment with room to spare? Will I leave the paid-off cards alone? Three yeses mean the score dip is a small cost. Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
If you are weighing a cash-out refinance against keeping the loan you have, Lendmire can help you compare the programs and the equity each one reaches.
Key Terms Defined
Hard inquiry: A credit check a lender runs when you apply for credit. It can lower your score slightly.
Utilization: The share of your available card credit that you are using. Lower is better for your score.
Seasoning: A waiting period a loan or ownership must meet before you can refinance.
LTV (loan-to-value): Your loan balance as a percentage of your home’s value.
Loan-level price adjustment: A pricing charge that varies by loan purpose, credit score and LTV.
Tradeline: A single credit account as it appears on your report.
Frequently Asked Questions
How many points will my score drop?
A small number, and no official source gives a fixed figure. The inquiry and the new account cause the dip. For many borrowers it fades over the following year of on-time payments.
Does shopping several lenders hurt my score more than one?
Not when the checks fall inside one window. The CFPB says mortgage inquiries within about 45 days count as one. Keeping quotes within roughly two weeks is safer, since some scoring versions use a shorter span. An auto loan inquiry counts separately.
Will paying off my cards with the cash raise my score?
Often, yes, because utilization drops. The lift can reverse if the cards fill up again. The CFPB study found card balances trended back toward earlier levels within a year, so a plan for those cards matters.
Does a cash-out hurt more than a rate-and-term refinance?
The inquiry and new-account effects are the same. The difference is the balance. A cash-out raises your mortgage balance, though a mortgage balance is not treated like card utilization. Eligibility and pricing also differ between the two, so compare both.
Can I close on a cash-out if my score dips between application and closing?
It depends on the file. Lenders may check credit again just before closing, and the final decision follows lender guidelines and full file review. Avoid new accounts and keep every payment on time until you close.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire is a mortgage brokerage (NMLS# 2371349) licensed for consumer mortgage lending in 16 states, arranging FHA, VA, conventional and jumbo purchase and refinance loans through a wholesale lending network. Eligibility is determined by the lender on each file. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
For the program’s current guidelines, see conventional loan programs.
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References
1. Experian – What affects your credit scores?
2. 2015 selling-guide announcement
3. CFPB – What happens when a mortgage lender checks my credit?
4. CFPB – Cash-out refinance borrowers improve credit scores
5. Fannie Mae Selling Guide B2-1.3-03 Cash-Out Refinance Transactions
6. Fannie Mae Eligibility Matrix
This article is part of Lendmire’s Conventional Loans series — every loan program’s qualification details, guidelines, and scenarios live on the loan options page.
Related reading: 6 Myths About the Cost of a Conventional Cash-Out Refinance · Conventional Cash-Out Refinance Electronic Verification Rules · How to Prepare a Conventional Cash-Out Refinance for a Clean Close
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Disclosure information. Lendmire is a state-licensed mortgage brokerage under NMLS# 2371349. Lendmire is not a depository institution, direct lender, or financial advisor — all loans referenced are placed through wholesale lender partners and are subject to each lender's underwriting standards. This article is provided for general informational purposes and is not a commitment to lend, nor does it constitute financial, legal, or tax advice. Loan programs, terms, rates, and qualification standards change without notice and depend on borrower profile, property type, and the state in which the subject property is located. Equal Housing Opportunity provider. NMLS Consumer Access: nmlsconsumeraccess.org.