Rebuilding Your Credit

[Donks3369]

Hopefully some out there can help me.

How does FICO look at revolving vs installment debt.  If someone was to have credit card bills and then consilidate them with an installment loan, would this lower their utilization and how do you think it would affect the score?  Thanks in advance.

[llecs]

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Donks3369 wrote:

Hopefully some out there can help me.

How does FICO look at revolving vs installment debt.  If someone was to have credit card bills and then consilidate them with an installment loan, would this lower their utilization and how do you think it would affect the score?  Thanks in advance.

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FICO calculates separately utilization for revolving + charge and installment. Revolving + charge seems to weigh a lot more heavily for revolving.

Your score will likely go up. I calculate it for every 1% your pay off your utilization down to 10% you will gain 1 point. So, if at 50%, then gain would be about 40 points. You will loose a small number of points for the installment, but I wouldn't be concerned with it. A few points, maybe. Maybe more due to the new credit, but much of that will come back in 3-4 months.

[Donks3369]

So do you think it would be a good idea to get a debt consolidation loan to pay down my CC debt?  The interest rates are about the same.  Please let me know what you think.  Thanks.

[oracles]

if the rates are about the same, then by all means go for it. Just make sure you don't bring the balance of your credit cards back up again.

[bassethoundmom]

I just got +34 from EX today for paying util. down from 95% to 3%.  Why so little? 

[llecs]

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bassethoundmom wrote:

I just got +34 from EX today for paying util. down from 95% to 3%.  Why so little? 

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I saw your other post. Had me thinking.

Probably due to only having one revolving account. I know if you add another you will have a decent boost. You'll also have an increase if you were to add a store charge card.

[Donks3369]

So if i got this installment loan it would knock my utilization from about 45% to about 5%.  There is no chance of running up my CC's again.  I also have 5 CC's with no annual fee.  Would it be best just to leave these open then?  I'm just trying to make sure that if I do this my score will be better.  Thanks again.

[bassethoundmom]

Thanks for the reply,  I was actually wondering if adding another account would help or hurt me?  I currently only have two current accounts, one for my car the other for this card that I paid down.   I think I'll wait until I have resolved as many issues as possible then apply for a store card somewhere. 

[debtisgood]

Unless you have a long average age, getting a new bank card or store card should help your score from the get go. If you have a long average age currently, a new card might be a neutral or a slight negative, that you will regain over time. Either way, having 4-5 accounts help maximize your score in the long run (though they are not necessary to achieve a high score).