Impact on FICO score of paying off a credit card with a "personal" loan vs. a "home equity loan"

[Anonymous]

To whomever knows the answer to this question, I have used the "simulator" of Credit Karma to find out what would happen to my credit score at TransUnion, Equifax and Experianand, if I completely paid off my $20,652 balance on my high interest credit card.  That simulator told me that my current score of 707 would jump to 805.  But what if I paid off my credit card with a much lower interest "personal" bank loan?  And what if I paid off the credit card with a "home equity" loan?  Would a personal loan be better or worse than a home equity loan?  Thank you in advance for your expert assistance.  Dr. JMG  

[Anonymous]

Hi and welcome, to detirmine what would be best it would be helpful to inquire with your bank to see if the Home Equity is a loan or HELOC line of credit, it is the latter some of those report as revolving lines which can negatively impact utilization, which is the same problem you are having now. A personal loan would be much easier to get and you could probably get the money within a day or two, but the negative of that is interest rates are fairly high for that, the disadvantage with a HE loan or line is that it will take longer to get the funds and usually results in a first or second lien being placed on your property which can sometimes be a pain to remove. If I were were you I would shop around for a personal loan but not for the full amount, if you are able to get the Utilization on each card below 30% and your total utilization below that number as well it should help your score significantly. Navy Federal and USAA have a simple process and their rates are decent, albeit there are some lower rates out there. 

[Anonymous]

I wouldn't necessarily believe that. Creditkarma told me I would get 100 point jump if I paid down X amount but I really got 40 points.

[SouthJamaica]

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@Anonymous wrote:

To whomever knows the answer to this question, I have used the "simulator" of Credit Karma to find out what would happen to my credit score at TransUnion, Equifax and Experianand, if I completely paid off my $20,652 balance on my high interest credit card.  That simulator told me that my current score of 707 would jump to 805.  But what if I paid off my credit card with a much lower interest "personal" bank loan?  And what if I paid off the credit card with a "home equity" loan?  Would a personal loan be better or worse than a home equity loan?  Thank you in advance for your expert assistance.  Dr. JMG  

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1. Regardless of effect on scores, it would be a mistake to encumber your home to pay off  credit cards.

2. Regardless of effect on scores, I think it would also be a mistake to take out a personal loan to pay off your credit cards.

3. I think your best bet would be to just bite the bullet, stop using your credit cards, and pay them down. concentrating on the card with the smallest balance first, then the next smallest, and so on (the snowball method). This will improve your scores.