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Member
Monkey-Doll
Posts: 16
Registered: ‎10-30-2012
0

Will debt consolidation help?

[ Edited ]

I just got off the phone with my credit union and they offered me a $4k loan at 13%. I did not take the loan, but was thinking that maybe I should ( i have 30 days to make a decision) and use the money to pay off my credit card balances to decrease my utilisation ratio ( currently 43%). My question is, how would taking this personal loan affect my credit score? will the less utilization ration bring a significant change on the credit score? how is this line going to affect me shopping for mortgages in a few months? In other words, is it worth it to take this extra $4k loan and decrease my credit card balances? Here's my current balances on my credit cards and their respective limits :

 

Discover Finance : Bal: $2386 Limit $4k

Citi :  Bal: $2073 Limit : $4k

Chase Bal : $1743 Limit $3k

Brclay:  Bal:$1020 Limit $2k

 Amex:  Bal :120, no set limit, paid of every month

 

     
     
     
     
     
Scores : 653, 654 , 663
Established Contributor
bettercreditguy1
Posts: 759
Registered: ‎02-11-2012
0

Re: Will debt consolidation help?

It all depends on what else is included in your reports. Yes, your utiliztion will decrease, however you will be dinged for an inquiry and one new account. These two items will follow your report for one year before the "newness" wears off. If you can keep your cc's new balances where they are or additional reductions, then the impact of the "new dings" may be offset. AS always, YMMV. I can say that last year, I opened 3 new accts, 2 of which were auto loans and one cc. When the oldest account aged to one year, (leaving 2 newer accounts less than one year) my scores went up 23 and 21 points respectively, with all other data the same. (util <2%, no late payments, all cc balances pif monthly and my home mortage reporting).  The question for yourself is, will this save me a measurable amount of money and be of positive impact, (beneficial) to me in the near future?

Starting scores 01/02/2012 EQ 707(Fico) TU 733(Fico) EXP 735 (FAKO)
Updated scores 06/01/2014 EQ 797(Fico) TU 768(Fico) EXP 769 (Fico), EQ 849 (Next Gen 5/27/14 Penfed)


Remember the Three P's: Pay early in Full, Pay on Time, Patience
Member
Monkey-Doll
Posts: 16
Registered: ‎10-30-2012
0

Re: Will debt consolidation help?

Hello,

 

Thank you for your response. They actually already checked my credit, so I guess the ding is there already? I guess what I am trying to find out is will the increase in score be worth taking this new loan or should I just focus on saving and paying off the credit cards even if that will take longer

Scores : 653, 654 , 663

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