Installment vs revolving - How will this effect my score???

[Anonymous]

I have about 25k in revolving debt. I am curiuos if I have the chance to get a 25k loan and use that to pay off my debt, how does that effect my scores.  Also will this effect my ablility to get a car loan in the near future by moving from revolving to installment?

BTW: My scores are in the low 7's

Dennis

[Junejer]

Hi rocket, welcome to the forums. Please read credit scoring 101 if you haven't already done so.

IMO, an amount that large is likely going to require some collateral. Do you have something that will cover that amount?

To answer your question though, it will help your scores, if you keep the accounts open and only allow an absurdly low uti % to report (like 1% or something).

[Anonymous]

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@Anonymous wrote:

I have about 25k in revolving debt. I am curiuos if I have the chance to get a 25k loan and use that to pay off my debt, how does that effect my scores. Also will this effect my ablility to get a car loan in the near future by moving from revolving to installment?

BTW: My scores are in the low 7's

Dennis

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It depends on what percentage UTL the $25k is? Please post your total available revolving credit limits so we can determine your UTL % to total credit. Opening a new installments can drop your score 10-30 points in the short term. So the gain would have to out weigh the loss. Best bet is to not apply for a loan and pay revolving debt down.

[Anonymous]

Well my total avaliable credit is about 57,000.  That would make it like 44%.  right?

[Junejer]

Right rocket. I am saying that you will see an increase. Geez, the only way you wouldn't see an increase is if you had over $277M in avail credit and that $25M were your only outstanding CL.

Again, you are likely going to need some collateral for an installment loan of this size.

[Anonymous]

Well, I secured the loan and paid off every single credit card I own.  Cut them up and I am done with them. (I did leave one, just in case of emergency, but its put away)

[Junejer]

Rocket, if you haven't closed those cards, don't. They are helping your score to be on your report. They stay on for up to 10 years from closing date. If they never close...

[Anonymous]

Nope, I was not planning on closing them, I'm new to the forum but not new to the credit score game. Thanks for your advice though,

[Junejer]

Cool. GL

[Anonymous]

rocketpop - Cutting the cards up but not closing them is much better than closing them.   But I would use a couple every few months, even to buy gas or something small.    FICO does consider recent use of revolving credit when calculating your score, so you will want some recent usage.

The other issue is that some card issuers close accounts on their own if no usage occurs for a period of time - worst offender is HSBC (closed by 12 year account after 3 months of inactivity without so much as a warning!).  You may be ok for awhile, but eventually the inactivity may result in their closing the account.