Build your credit before you refinance

A refinance rate is priced on you. Two dentists with the same balance and income can get different offers because of what’s on their credit reports.

The good news: most of what hurts a new dentist’s credit is fixable in a few months. Start before you apply, not during.

First, decide whether to refinance at all

Refinancing turns federal loans into private ones. For those loans you lose access to RAP, PSLF, federal forgiveness, and federal forbearance and deferment. You can’t undo it.

If you’re pursuing PSLF or might work at an FQHC, government clinic or nonprofit, you probably shouldn’t refinance. Read should you refinance your dental school loans? and when refinancing is a mistake first.

Good credit habits help either way. They matter for a car, a mortgage and, later, a practice loan.

What lenders look at

Your credit history and score. Most credit scores treat repayment history as the number one factor, per the CFPB. Scores also weigh how close you are to your limits, how long you’ve had credit and how often you’ve applied recently.

Debt-to-income ratio (DTI). DTI is all your monthly debt payments divided by your gross monthly income. Lenders use it to gauge whether you can handle a new payment. Different lenders set different limits, per the CFPB.

Income. Expect to document it. Your income is the denominator in your DTI, so a new raise or job change matters.

You also have more than one score. The number you see in an app may not match the one a lender pulls.

A DTI example

An associate earns $180,000, or $15,000 a month gross. Monthly debts:

Debt	Monthly payment
Federal student loans (RAP)	$1,410
Car loan	$600
Credit card minimum	$100
Total	$2,110

$2,110 divided by $15,000 is a DTI of about 14%. Ask each lender how it counts your current student loan payment, since that line can be the biggest one.

Check your reports for free

Your reports from Equifax, Experian and TransUnion are free every week at AnnualCreditReport.com, per the FTC. You can also call 1-877-322-8228.

That’s the only website authorized to fill orders for the free reports you’re entitled to by law, the FTC says. Be wary of other sites that advertise “free” reports.

Checking your own reports is a soft inquiry. It doesn’t affect your score, per the CFPB.

What to look for:

• Accounts you don’t recognize
• Late payments you made on time
• Student loans listed twice, or with the wrong balance or status
• Old addresses or names that aren’t yours
• Paid-off debts still shown as open

Fix errors

Disputes go two places, per the CFPB.

1. The credit bureau. Explain in writing what’s wrong and why, and include copies of documents that support you. The bureau must investigate and send your dispute to the company that reported the item.
2. The company that reported it (the “furnisher”), such as your servicer or card issuer. Send it in writing, by certified mail. Furnishers generally must investigate and respond within 30 days of getting it.

If the furnisher decides the item is accurate, you can ask the bureaus to add a statement explaining your dispute. If you suspect identity theft, start at IdentityTheft.gov.

Build in time. A dispute started the week you apply may not finish before a lender pulls your report.

Lower your utilization

Scoring models look at how close you are to being “maxed out,” per the CFPB. Experts advise keeping card balances at no more than 30% of your total credit limit.

• Pay cards in full. You don’t need to carry a balance to build a good score, the CFPB says.
• Don’t close old cards right before applying. Closing one can raise your utilization, since your balances stay the same while your total limit shrinks.
• Hold off on new credit. Applying for a lot of credit in a short time can look like financial stress, per the CFPB.

Timing the refinance application

Soft pulls first. Many refinance lenders and marketplaces show estimated rates after a soft check. Soft inquiries don’t affect your credit score, per the CFPB.

Then apply in a tight window. When you apply, the lender makes a hard inquiry to decide on approval. Hard inquiries can affect your score. Scoring models generally count inquiries within 14 to 45 days for the same type of loan as a single inquiry.

For the most common scoring models, student loan inquiries in the 30 days before scoring have no effect at all, the CFPB says. Doing all your hard-pull applications within about two weeks keeps you inside every version of that window.

Don’t mix loan types. Shopping for a refinance and a car loan in the same month generally counts as separate inquiries.

When	What to do
3 months before	Pull all three reports; dispute errors
1 to 2 months before	Pay cards down below 30%; avoid new credit
Application window	Soft-pull quotes; then hard-pull applications within about two weeks

For students and brand-new grads

A thin file is common in dental school. You may have student loans and little else.

• Pay every bill on time, including any card or car loan. Automatic payments help.
• Consider a starter product if you have no credit. The CFPB points to secured credit cards and credit builder loans.
• Pull your reports now. Confirm your federal loans show up correctly before your grace period ends.

What to do next

1. Pull your reports at AnnualCreditReport.com this week.
2. Dispute anything wrong with both the bureau and the furnisher.
3. Get card balances under 30%.
4. Run your numbers in the refinance vs forgiveness tool before you shop.
5. Compare rates with soft pulls, then apply in one short window. See student loan refinance rates for dentists.