Paying Down B of A C/C With Personal Loan

Anonymous · ‎02-05-2012

Greetings Everyone; I don't post very often but I have a question, I have a B of A C/C with a $10,000 credit limit that I had to get a $8,000 emergency cash advance on at 19% interest. Doing that dropped my credit score from the high 700's to the low 700's. Now I have gotten a prescreened offer from Discover for a personal loan of up to $25,000 with a interest rate of 7.99%. My question is if I get a personal loan from Discover of $8,000 to pay down my B of A C/C to 1% how will this affect my credit score? BTW I also have a Chase C/C with a credit limit of $5,000 that I keep the ballance to 1% or so. Thank's in advance for your responses, Michael White

LS2982 · ‎02-05-2012

@Anonymous wrote:
Greetings Everyone; I don't post very often but I have a question, I have a B of A C/C with a $10,000 credit limit that I had to get a $8,000 emergency cash advance on at 19% interest. Doing that dropped my credit score from the high 700's to the low 700's. Now I have gotten a prescreened offer from Discover for a personal loan of up to $25,000 with a interest rate of 7.99%. My question is if I get a personal loan from Discover of $8,000 to pay down my B of A C/C to 1% how will this affect my credit score? BTW I also have a Chase C/C with a credit limit of $5,000 that I keep the ballance to 1% or so. Thank's in advance for your responses, Michael White

You should see a point increase for utilization decrease on BofA but could take a point loss for new installment account with Discover. Kind of a lose/lose FICO wise but takes you out of debt on the CC and manageable payments on a loan.

EQ FICO 548 3/3/16

Anonymous · ‎02-05-2012

So the only thing that I would gain is a reduction in my interest rate by a little over half? Don't get me wrong, that's a good thing. I was hoping that getting the high balance and the high percentage of the maximum amount allowed on this C/C back down to 1% or so would outweigh the new personal loan and inquiry hit, since that is what took my Fico down from the high 700's down to the low 700's in the first place. But that is not to be?

MarineVietVet · ‎02-05-2012

@Anonymous wrote:
So the only thing that I would gain is a reduction in my interest rate by a little over half? Don't get me wrong, that's a good thing. I was hoping that getting the high balance and the high percentage of the maximum amount allowed on this C/C back down to 1% or so would outweigh the new personal loan and inquiry hit, since that is what took my Fico down from the high 700's down to the low 700's in the first place. But that is not to be?

Hi there.

It's very hard for anyone to predict what a particular action will do to your score because we all have different credit reports and they are constantly changing but if you reduce that utilization from 80% down to 1% I would guess a very nice bump. How much? I won't attempt to guess.

I would only caution you though to be very careful going forward not to run charges back up on that card because then you'll once again be maxed out and owe the personal loan at the same time.

Let us know what happens to your score with the reduction in utilization will you?

From a BK years ago to:
EX - 3/11 pulled by lender- 835, EQ - 2/11-816, TU - 2/11-782

"Some people spend an entire lifetime wondering if they've made a difference. The Marines don't have that problem".

Anonymous · ‎02-05-2012

I certainly will. It will probably be the end of the month or so by the time I get the Discover personal loan and have it post to my B of A C/C and I pull my Fico. But soon as these things happen I will post the results. Thanks for your replys. Edited to remove personal information - MarineVietVet, myFICO moderator

guydiver · ‎02-06-2012

@LS2982 wrote:
@Anonymous wrote:
Greetings Everyone; I don't post very often but I have a question, I have a B of A C/C with a $10,000 credit limit that I had to get a $8,000 emergency cash advance on at 19% interest. Doing that dropped my credit score from the high 700's to the low 700's. Now I have gotten a prescreened offer from Discover for a personal loan of up to $25,000 with a interest rate of 7.99%. My question is if I get a personal loan from Discover of $8,000 to pay down my B of A C/C to 1% how will this affect my credit score? BTW I also have a Chase C/C with a credit limit of $5,000 that I keep the ballance to 1% or so. Thank's in advance for your responses, Michael White
You should see a point increase for utilization decrease on BofA but could take a point loss for new installment account with Discover. Kind of a lose/lose FICO wise but takes you out of debt on the CC and manageable payments on a loan.

This is the main focus here. Any Fico hit you take will most likely be short term. It's a good trade-off for sure. I would take that deal in a second. Good luck.

Anonymous · ‎02-15-2012

Let us know what happens to your score with the reduction in utilization will you?

I received my reply as to the Discovery Personal Loan that I applied for and I was rejected for what they said was a high debt to income ratio, even with a FICO Score in the high 720 ty's to low 730 ty's. So all I accomplished was to add a enquiry to my FICO Score, Bummer.

Anonymous · ‎02-18-2012

@Anonymous wrote:
Let us know what happens to your score with the reduction in utilization will you?

I received my reply as to the Discovery Personal Loan that I applied for and I was rejected for what they said was a high debt to income ratio, even with a FICO Score in the high 720 ty's to low 730 ty's. So all I accomplished was to add a enquiry to my FICO Score, Bummer.

My Question now is if indeed my debt to income ratio is to high for this loan (it is around 30%) would I have a lower overall Fico score as I thought that debt to income was one of the main criteria used for the Fico scoring system.

MarineVietVet · ‎02-18-2012

@Anonymous wrote:

My Question now is if indeed my debt to income ratio is to high for this loan (it is around 30%) would I have a lower overall Fico score as I thought that debt to income was one of the main criteria used for the Fico scoring system.

No aspect of income is factored into scoring. A lender will look at the DTI in making decisions but FICO never looks at DTI.

You might be thinking about utilization which is the total balances divided by the total available credit. That is 30% of your total score and is definitely a big part of your score.

Anonymous · ‎02-18-2012

@MarineVietVet wrote:
@Anonymous wrote:

My Question now is if indeed my debt to income ratio is to high for this loan (it is around 30%) would I have a lower overall Fico score as I thought that debt to income was one of the main criteria used for the Fico scoring system.
No aspect of income is factored into scoring. A lender will look at the DTI in making decisions but FICO never looks at DTI.
You might be thinking about utilization which is the total balances divided by the total available credit. That is 30% of your total score and is definitely a big part of your score.

So in obtaining credit a lender might and does look at different parameters than just your FICO Score?. So your FICO Score is not the end all be all of obtaining credit?