Refinanced and my CS tanked?

[Anonymous]

Last year I did a cashout refinance on our home. I got my cash and the previous loan was totally paid off at the time by the mortgage company I worked with that helped me with the refinance as well.

Several months go by (I had a one month free of mortgage) and I received a letter that my loan has been sold, with the terms intact of course, and I will get more info like where to send payment, etc.. it's in the mail. The letter arrived what appeared to be from Wells Fargo but it had a suffix I'd never seen before or was unfamiliar with but I forgot what that was. Anyway the letter had their logo looked legit, address etc.. So I went online Wells Fargo website signed up put the loan number etc.. It's all good I received a confimation email etc.. Their system did recognize me as a previous Wells customer as I had a car loan with them that I paid off back in the days.

As all this was happening, I noticed suddenly that my CS dropped across the board. On one CRB as much as 30 pts! So I'm looking at my CR and it looked like I completely paid off my mortgage and have no outstanding mortgage loan (don't I wish!).

Another letter arrives but this time it's 'Welcome to Wells Fargo Home Mortgage' as my new lender. I'm still kinda confused how this happened. My credit did some rebounding on the up-and-up but not as much as I'd like to recoup the pts. loss I've seen from this refi.

I knew I'd take some hits with multiple CRI in the process of getting approval from the start, but nothing this significant. Have any of you experienced anything like this with a refi?

[Anonymous]

This is completely normal and it happens all the time.

When you do a refi, you're taking a loan that's at less than 100% utilization and replacing it with a loan that's at 100% utilization.  Depending on how much the original loan is paid down, this could be up to a 25-30 point hit.  It also sounds like you grabbed your report after the first loan was paid off/closed but before the new one reported.  If that's the case, you could have been dinged for having no installment loan present on your CR at that moment.  This is another common cause for a 25-30 point ding, again depending on what the final utilization percentage was on your original mortgage just before it reported as paid off.

[Anonymous]

Thanks for your valuable feedback. For a while there I thought I did something terribly wrong with the refi process. And yes I did grab my report after the first loan was paid/closed.

[Anonymous]

Out of curiosity, how many years had you been paying down the original mortgage prior to it closing and what was the utilization percentage (current balance / original balance) on the mortgage prior to it closing?  From what I've seen, somewhere around 75% utilization (25% paid down) often eliminates FICO negative reason codes related to having too high of a balance, meaning that the majority of points may be realized somewhere around that time.

[Anonymous]

Not that long about 6 years and yes your UTI numbers make total sense as I haven’t paid down enough in percentage to not get dinged..