"Closed Mortgage Account/Paid-off" Decreased FICO Score???

[icebox702]

We have recently refinanced our mortgage (FHA Streamline Refi) and a couple of weeks later, I received an alert indicating that my FICO score decreased by 23 points.  This is what was reported by my former lender:

Closed or Paid Account/Zero Balance
Real estate mortgage
Fixed rate

It also reported "Not more than 2 payments past due" which is confusing since we have never been late on our mortgage! We only have had paid this mortgage for about 39 months (a little over 3 yrs) so I am thinking that could be one of the reasons why it pulled my score down.  But shouldn't paid off balance accounts bring scores up? The new lender has yet showed up on my report so I can only imagine what that would do to it!

[09Lexie]

FICO scoring uses an algorithm which includes a "mix of TLs". Since your mortgage is now closed, you no longer have the benefit of that TL. Yes, it looks good that you paid your mtg but it did cause an adjustment to your score. Basically rebucketing you with others with similar profiles.

Your scores will rebound in time.

[llecs]

I don't think it's rebucketing. It's my understanding that closed TLs still factor into your mix of credit and therefore this mortgage fully factors in.

However, OP, I think you are basing the score change on a SW alert? If so, know that any score change is a NET score change and could include factors like the mortgage closing, balance changes elsewhere, etc. For example, I got a SW alert for +20 because I added an inquiry. Inquiries do not boost your FICO but it was a baddie dropping that SW doesn't alert to that resulted in the +20 net score change. So there could be other factors within your CR that resulted in a score drop and not the mortgage itself. 

I would investigate the late though. If they added it when the mortgage updated then that could certainly drop your FICO. If you pull your report from the CRA directly you could see when that late was added (assuming it were older than 2 yrs). look for other changes too. Also a $0 balance could impact your FICO a little, it either direction. 

[09Lexie]

illecs, you might be correct regarding rebucketing. IME, even though my paid/closed mtg still shows on my credit report- I get this under credit mix:


'If you ever have a mortgage that shows up on your credit report then you will do even better in this category. The reason is that studies show that consumers who have mortgages are more stable than consumers who do not. And, credit scores will reward you because of that stability.'

As usual, YMMV