Score Hit for New Mortgage

[TheKid2]

Interesting datapoint on my new mortgage. I had always thought that I would take a score hit when my new mortgage reported, but for me that didn't happen. The new mortgage reported with no change to scores and it stayed that way for many days as my CRs showed 2 mortgages (with quite a hefty total balance/payment while both were reporting).

When my old mortgage finally reported paid/closed, that is when I took the score hits. I found this quite odd as purely from a risk persepctive I would think I would be a way more risky borrower with 2 mortgages open than with 1. This score hit happened across all FICO versions, with newer versions having a slightly higher hit than the older versions. In other words, the 8s/9s fell more than the 2s.

BTW, I'm in a dirty no-PR scorecard.

[Trudy]

I believe this may have more to do with AGG UTL for installments.  Although it is said the biggest gain for installment UTL is when AGG is less than 9%, there are other not so well defined thresholds.  So when your old account closed your UTL went from whatever it was up to 100% UTL. I personally feel the 5,4,2 models have more of an impact regarding AGG UTL than 8's.  At least before you reach below 9%.

https://ficoforums.myfico.com/t5/Personal-Finance/Aggregate-Installment-Loan-UTI-DP/m-p/6141721#M207...

[Thomas_Thumb]

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@TheKid2 wrote:

Interesting datapoint on my new mortgage. I had always thought that I would take a score hit when my new mortgage reported, but for me that didn't happen. The new mortgage reported with no change to scores and it stayed that way for many days as my CRs showed 2 mortgages (with quite a hefty total balance/payment while both were reporting).

When my old mortgage finally reported paid/closed, that is when I took the score hits. I found this quite odd as purely from a risk persepctive I would think I would be a way more risky borrower with 2 mortgages open than with 1. This score hit happened across all FICO versions, with newer versions having a slightly higher hit than the older versions. In other words, the 8s/9s fell more than the 2s.

BTW, I'm in a dirty no-PR scorecard.

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Fico scoring looks at age of all installment loans and age of open installment loans with respect to AAoA and AoOA. When the new loan reported your AAoA dropped but not your AoOA. Now when the old loan closed your Open AAoA and AoOA both took a nose dive which results in a score drop.

The 2nd thing that happened is your change in aggregate mortgage utilization. Not sure how big the new mortgage was compared to the old mortgage. Let's say your new mortgage is for $300k and the old was $300k. For sake of illustration let's say the old loan had 3% remaining on loan and the new loan initially reported at 100% remaining. Then the old loan gets paid off and closed. Your aggregate mortgage utilization (B/L) changes as follows:

1) 3% (old only)

2) 51.5% (old + new)

3) 100% (new only)

I have seen no score gains associated with bringing my mortgage down from a little more than 50% B/L to now 1% B/L. It is my only loan. For my mortgage I did not see a score boost dropping below 9% B/L. So, I am not surprised that your score did not drop when the new loan reported given the old loan was still open. However, I would anticipate a score penalty associated with taking aggregate mortgage BL from 51.5% to 100%.

What were your mortgage balances and loan amounts? Was your old mortgage above or below 9% B/L ratio when it was paid off and closed?

[TheKid2]

Thanks for the feedback, this helps alot.

My old mortgage was 300/450 (about 66% Util when paid off)

My new mortgage is 500

So during the transition when both were reporting (800/950), it was likely similar enough to not change my scores based on Util. Then when the old mortgage fell off, BAM up to 100% Util. I think I get it.

It's really interesting that for that short period of time when both were reporting as payments I would have looked very over extended with a silly high DTI. haha