What to do with Personal Loan

[Anonymous]

My wife and I were just approved for a personal loan at 6.99% over 5 years from Capitol One.  Between my wife and I, we currently have around $22k in cc debt (about 40% of credit limit), $15k in student loans at 5%, and $5k in car loan at around 7%.  Looking to apply for new home loan in about 3 months.  Our FICO scores are both around 800 right now.  We are considering paying off all cc debt and car loan with this personal loan (we will leave a small amount on each to be around 1% of credit limit).  When applying for home loan, thought it would be best to show just one single monthly payment (personal loan of $584) rather than $1200 (cc payments of around $700 plus car payment of around $500).   

Questions:

-Will the plan above help or hurt our FICO score and chances of getting best mortgage rate?

-Do personal loans show up the same as car loans as far as FICO score goes?

-Will paying off car loan in our situation hurt or help our FICO score?

Thanks!

[Anonymous]

Paying down those CC balances with a personal loan will greatly improve your FICO score, especially with a relatively high (40%) utilization. A personal loan will show up as an installment loan, similar to a car loan (although the notation will will be different). Although I would leave the car loan and student loans as they are. First off, you would be paying more in interest on the student loan (5% vs 6.99%), and not really saving any money by consolidating the car loan. Further, you might reduce your FICO score by reducing your mix of credit (car, student, and personal loan vs just a personal loan).

Earlier this year, I consolidated $7K in CC debt (at 85% util.) with a personal loan and my FICO went up by 70 points.

In the end however, both your FICO scores are around 800, which will get you a great interest rate. There isn't a whole lot of room to improve on an already great score.

So, my advice is to take the personal loan, pay off your credit cards with it. Keep the car and student loans as they are. If nothing else you will be saving a bunch of money by not paying all of that interest on your credit cards.

Message Edited by tege0005 on 01-02-2008 12:15 PM