Good morning. Last night I was approved for a LendingClub loan ranging from $4k to $14k, which I’m thinking of using to pay off most or all of my credit cards and perhaps some of my installment loans. This is mostly in an effort to raise my scores and apply for a mortgage. Even though the interest rate they offered me is a little higher than on most of my cards, would it be logical to do this so that score goes up now versus a few years down the road if I were to keep paying them off directly?
I got a preapproval letter from LendingClub myself yesterday, checked (no effect on credit scores) this morning and found out I'm pre-approved for up to $16K. It's quite tempting, to be sure, I got a decent APR offer (less than any of my current cards) and the payments at the amounts I'd be most likely to borrow - it's a bit irritating that you can only borrow in $2K increments - are less than what I currently put on my CC payments, but one must think very carefully about this and be sure one isn't just going to consolidate the existing balances and then run right back out and run up new ones. Also, I've seen conflicting accounts as to whether a LendingClub loan counts as an installment loan (which helps your score) or a personal finance loan (which can hurt your score). If you're looking into a consolidation loan, it might be more worth your while to inquire through your credit union, if you belong to one.
I think it is important to consider not just your credit score, but also your debt to income ratio. Loans will generally have higher monthly payments than credit cards. A 850 score won't help you get a mortgage if your DTI is too high. If you are purely concerned with your score as your income will allow for the mortgage size you want regardless of your monthly obligations, then this could help increase scores. (depending upon your specific profile).
Things to consider,
AAoA before and after new credit.
AoYA with new credit when you are applying to mortgage (might have to hold off on applying until the account ages.)
Utilization of cards. Going from 70% to 0 will have a larger effect than going from 17% to 0. (both individually and in aggregate.)