Score Dropped with Refinance.....Why!!

[Creditspa]

I recently completed a refinancing of my home mortgage loan. The old  existing loan (one I refinance) just reported as PIF on my EQ  CR. I also just received another EQ credit alert than my score dropped 11 points. I also noticed that the new loan has not started reporting yet, maybe because my first payment is not due ( has not been paid) yet.  

Questions:

1. Is this common to get such a huge (or any) drop in FICO score when one refinance?

2. When the new loan hits will I again be subjected to a score reduction (ding) for a new loan.

This FICO scoring algorithm is super crazy. I honestly though that my score would increase for a short while since the loan is now showing as PIF(after the refinance), then when the new loan post to the CR, then I will get ding for a new mortgage account, thus the reduction.

[cdtotten]

Couple things likely in play here:

1. New inquiries dropping your score a couple points.

2. With your mortgage showing PIF, you no longer have an open, active mortgage account.

When your new mortgage starts reporting, your score will either rise because of having an active mortgage, or it will fall because your AAoA will drop from the new account. No way to tell.

Good luck.

[rckstrscott]

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@Creditspa wrote:

I recently completed a refinancing of my home mortgage loan. The old  existing loan (one I refinance) just reported as PIF on my EQ  CR. I also just received another EQ credit alert than my score dropped 11 points. I also noticed that the new loan has not started reporting yet, maybe because my first payment is not due ( has not been paid) yet.  

Questions:

1. Is this common to get such a huge (or any) drop in FICO score when one refinance?

2. When the new loan hits will I again be subjected to a score reduction (ding) for a new loan.

This FICO scoring algorithm is super crazy. I honestly though that my score would increase for a short while since the loan is now showing as PIF(after the refinance), then when the new loan post to the CR, then I will get ding for a new mortgage account, thus the reduction.

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Well, 11 points isn't exactly a huge drop. Many things could cause an 11 point drop, including using you credit cards a little more last month.

I am agreeing with the poster before. You don't get point increases from paying off existing installment debt. You are SUPPOSED to do that. So FICO sees no point increase by the loan being paid down. You will likely see more decrease when the loan hits due to AAoA -- All of these are minor really.

My guess is the 11pts is simply the inq. I lost 14 points when I did an inquiry to apply for the mortgage I am seeking now. 

-scott

[Creditspa]

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@rckstrscott wrote:

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@Creditspa wrote:

I recently completed a refinancing of my home mortgage loan. The old  existing loan (one I refinance) just reported as PIF on my EQ  CR. I also just received another EQ credit alert than my score dropped 11 points. I also noticed that the new loan has not started reporting yet, maybe because my first payment is not due ( has not been paid) yet.  

Questions:

1. Is this common to get such a huge (or any) drop in FICO score when one refinance?

2. When the new loan hits will I again be subjected to a score reduction (ding) for a new loan.

This FICO scoring algorithm is super crazy. I honestly though that my score would increase for a short while since the loan is now showing as PIF(after the refinance), then when the new loan post to the CR, then I will get ding for a new mortgage account, thus the reduction.

---

Well, 11 points isn't exactly a huge drop. Many things could cause an 11 point drop, including using you credit cards a little more last month.

I am agreeing with the poster before. You don't get point increases from paying off existing installment debt. You are SUPPOSED to do that. So FICO sees no point increase by the loan being paid down. You will likely see more decrease when the loan hits due to AAoA -- All of these are minor really.

My guess is the 11pts is simply the inq. I lost 14 points when I did an inquiry to apply for the mortgage I am seeking now. 

-scott

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I get what you two are saying, but my credit score took a hit already when the inquiry showed up two months ago. Two credit alerts came today on EQ scorewatch alert: The first showed that old mortgage is now PIF and the second showed the decrease in credit FICO score. My utilization actually went down from the time I applied for the mortgage two months ago, so I didn't know that a PIF would have a 11 pts decrease on FICO. To put it simply, I'm just shocked and didn't expect that huge decrease in score. I am waiting for the new PIF to pop up in the tradeline ton my EX and TU scores,  in order to find out the effect it will have on them. At lease I can check TU score on that.

[rckstrscott]

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@Creditspa wrote:

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@rckstrscott wrote:

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@Creditspa wrote:

I recently completed a refinancing of my home mortgage loan. The old  existing loan (one I refinance) just reported as PIF on my EQ  CR. I also just received another EQ credit alert than my score dropped 11 points. I also noticed that the new loan has not started reporting yet, maybe because my first payment is not due ( has not been paid) yet.  

Questions:

1. Is this common to get such a huge (or any) drop in FICO score when one refinance?

2. When the new loan hits will I again be subjected to a score reduction (ding) for a new loan.

This FICO scoring algorithm is super crazy. I honestly though that my score would increase for a short while since the loan is now showing as PIF(after the refinance), then when the new loan post to the CR, then I will get ding for a new mortgage account, thus the reduction.

---

Well, 11 points isn't exactly a huge drop. Many things could cause an 11 point drop, including using you credit cards a little more last month.

I am agreeing with the poster before. You don't get point increases from paying off existing installment debt. You are SUPPOSED to do that. So FICO sees no point increase by the loan being paid down. You will likely see more decrease when the loan hits due to AAoA -- All of these are minor really.

My guess is the 11pts is simply the inq. I lost 14 points when I did an inquiry to apply for the mortgage I am seeking now. 

-scott

---

I get what you two are saying, but my credit score took a hit already when the inquiry showed up two months ago. Two credit alerts came today on EQ scorewatch alert: The first showed that old mortgage is now PIF and the second showed the decrease in credit FICO score. My utilization actually went down from the time I applied for the mortgage two months ago, so I didn't know that a PIF would have a 11 pts decrease on FICO. To put it simply, I'm just shocked and didn't expect that huge decrease in score. I am waiting for the new PIF to pop up in the tradeline ton my EX and TU scores,  in order to find out the effect it will have on them. At lease I can check TU score on that.

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I agree then with the other post, the change is likely not having an active mortgage in your credit score blend, and that will change when the new one hits

-scott

[Creditspa]

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@rckstrscott wrote:

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@Creditspa wrote:

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@rckstrscott wrote:

---

@Creditspa wrote:

I recently completed a refinancing of my home mortgage loan. The old  existing loan (one I refinance) just reported as PIF on my EQ  CR. I also just received another EQ credit alert than my score dropped 11 points. I also noticed that the new loan has not started reporting yet, maybe because my first payment is not due ( has not been paid) yet.  

Questions:

1. Is this common to get such a huge (or any) drop in FICO score when one refinance?

2. When the new loan hits will I again be subjected to a score reduction (ding) for a new loan.

This FICO scoring algorithm is super crazy. I honestly though that my score would increase for a short while since the loan is now showing as PIF(after the refinance), then when the new loan post to the CR, then I will get ding for a new mortgage account, thus the reduction.

---

Well, 11 points isn't exactly a huge drop. Many things could cause an 11 point drop, including using you credit cards a little more last month.

I am agreeing with the poster before. You don't get point increases from paying off existing installment debt. You are SUPPOSED to do that. So FICO sees no point increase by the loan being paid down. You will likely see more decrease when the loan hits due to AAoA -- All of these are minor really.

My guess is the 11pts is simply the inq. I lost 14 points when I did an inquiry to apply for the mortgage I am seeking now. 

-scott

---

I get what you two are saying, but my credit score took a hit already when the inquiry showed up two months ago. Two credit alerts came today on EQ scorewatch alert: The first showed that old mortgage is now PIF and the second showed the decrease in credit FICO score. My utilization actually went down from the time I applied for the mortgage two months ago, so I didn't know that a PIF would have a 11 pts decrease on FICO. To put it simply, I'm just shocked and didn't expect that huge decrease in score. I am waiting for the new PIF to pop up in the tradeline ton my EX and TU scores,  in order to find out the effect it will have on them. At lease I can check TU score on that.

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I agree then with the other post, the change is likely not having an active mortgage in your credit score blend, and that will change when the new one hits

-scott

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This makes more sense to me now. I hope that I gain the 11 points that was deducted when the new laon starts posting to the CR. I cannot imaging that there will be another deduction again for a new mortgage account with the same creditor/bank.  This would be a dummy whammy!

[creditmax11]

So did your score go back up once the new Mortgage showed on your Credit Report?

I am in the same boat, refinanced in November and my old mortgage now says Paid in Full (credit score dropped), still waiting for the new Mortgage to show on my Credit Report. When this happes will it lower or raise my credit score?

[webhopper]

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@creditmax11 wrote:

So did your score go back up once the new Mortgage showed on your Credit Report?

I am in the same boat, refinanced in November and my old mortgage now says Paid in Full (credit score dropped), still waiting for the new Mortgage to show on my Credit Report. When this happes will it lower or raise my credit score?

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Hi and welcome to the myFico forums! In case the User never comes back online I would suggest that the score will mostly bounce back within a year. In the short term you may see a small drop due to a new account reporting and drop in average age of accounts. Over time as your accounts re age the drop will go away and probably even climb.

[creditmax11]

Thank you for the answer. I am just concerned because right now my old loan shows PIF and my new loan is not showing yet. I got about a 12-15 point drop accross the board on all my FICO's. I need to purchase a new car in Feburary and I'm just stuck in limbo because my mid score used to be 704 , now they it is 692. I'm worried if it drops much further I will not be getting a good rate on my auto loan when I get my new car in about 2 months.

Hmmm... maybe the automobile scoring system will still how 700+? Not sure, but I wish I would have known about this sooner.

Any recommendations? My 1st new mortgage payment is due 1/1/2013  (do you know when this loan will show on my Credit Reports?) maybe I should try and get the car before the new loan posts on the Credit Reports?

[webhopper]

Your auto loan will likely used an auto enhanced scoring matrix which heavily weighs your on time mortgage and installment payments histories. I see no reason why you wouldn't be approved for the best rate as long as you've never been late on an installment payment. My new loan took 4 months to show up. My advice is not to sweat over this small drop. You'll still get the best auto rates! If you decide to apply for the car now, be sure that the dealership knows that you have a mortgage that is not yet reporting. They will need to include that housing payment when they underwrite your new auto loan.