CC Balances and Improving Util

[Whereis750]

I’m working on decreasing my utilization on revolving credit card accounts and thinking about a signature loan for $6200 from my Credit Union.  This is what I have to pay off:

AMEX  Blue        $1860/2000

Best Buy            $1290/1500

Capital One      $984/1000

HSBC                 $1130/1200

Merrick               $923/1050

The interest rate on the loan will be much lower than the interest rates on these cards. Plus paying off the CCs and having one card report 5-7% util will help my score.  What are the downsides to this plan?  From what I can tell there will be a new INQ for the signature loan and my AAoA will decrease because of the new installment loan.  AAoA currently at 6 years, oldest account at 12 years. 

[tcbofade]

Sounds like a good plan, but will the CU do it while your utilization is so high?

[FrugalRican]

I'd be a lot more worried about saving myself some money by paying all of those cards off first before I'd worry about AAOA and INQ's.

 

The downsides? It looks like you like to rack up balances.

My worry is that once your CC's are freed up and you consolidated the loan, that you'll run up balances once again and then you'll have MORE debt than what you originally set out to have.

The plan works, if you don't rack up balances all willy nilly.

Use the CC's responsibly and PIF each month while you pay down the loan.

[Whereis750]

The reason for the sig loan is to do just that – save myself some money via lower interest on the sig loan compared to the CC rates.  And I’m keeping AAOA and INQ’s in mind because they matter after all when trying to improve one’s FICO score.

I understand the downside to this plan if one were to rack up balances once CCs are freed.  I don’t plan on it considering I joined myFICO, SW, and Quarterly Monitoring with sole purpose of IMPROVING my credit picture.

My question to the community is what negative effects to my FICO health are seen with this plan?

[FrugalRican]

Is there something you are looking to purchase (car/house) within the next year?

[Whereis750]

Within the next 12 months my wife and I may purchase our first home.  I also plan on joining NFCU and apply for one of their CCs.

[steffiejoe]

I'm not sure how FICO may see your credit union but they considered my local credit union as a personal finance account.

My credit score was affected based on this statement- "you have to many personal finance accounts."

Mind you I had my car loan with them and a signature loan.

Thank goodness this has dropped off.

[FrugalRican]

It's really hard to say how much it'll affect your score, because the

Negatives: AAOA gets hit, INQ on the CR

Positives: Utilization on revolving accounts goes to 0, as long as the loan reports completely as an installment loan (Someone feel free to correct me on this, I do know there are LOC's and some personal loans that get counted as revolving)

So you might get points taken off for the negatives but then points given for the positive.

[ajh5408]

What type of interest rate and fees would you be paying on the CU loan? As some others have indicated, it really depends on how it's reported on your CR... If you're clear of derogs, have a long AAoA (as you noted), and a decent income... Maybe look at a Chase Slate (or similar) no-fee balance transfer. It wouldn't help your util in the way converting to an installment loan would, but there's no guarantee it'll be seen that way anyway.

Do you have a car that you could do a cash-out refi on? That would be another way of converting CC debt to an installment loan.