” To answer that, you need to understand how credit reports and credit scores work.If you’re not familiar with the process, here’s a very brief explanation: Your credit report contains information about all the credit accounts you’ve ever had, including mortgages, auto loans, credit cards, student loans, etc.Many of the credit card offers that appear on this site are from companies from which Nerd Wallet receives compensation.
But finding a loan with decent terms for this purpose can sometimes be challenging — especially if your credit scores are a bit lower due to the balances you are carrying.
A credit score is derived from items reported in your credit file.
It uses a complex mathematical algorithm to come up with a score that predicts whether you are more or less likely to default on your next loan.
And the fact that many people do just that is why the action will temporarily cut your rating.
For the record, and for those who don't know the difference, a credit rating and a credit score are 2 different things.