topic Which category for utilization is a debt consolidation loan in General Credit Topics

Which category for utilization is a debt consolidation loan

jackg — Mon, 09 Jun 2014 19:12:17 GMT

If I do a debt consolidation loan that pays off all my credit card debt where will that new debt show up? Will my CC % of utilization drop to zero? If I remember correctly debt consolidation debt is installment debt like a home mortgage, is that right?

Re: Which category for utilization is a debt consolidation loan

Anonymous — Mon, 09 Jun 2014 19:32:27 GMT

Consolidation typically moves revolving debt to installment debt.

These are scored differently, and this difference is the basis of the gains that are seen.

Re: Which category for utilization is a debt consolidation loan

jackg — Mon, 09 Jun 2014 19:47:00 GMT

Thanks but will my CC debt utilization drop to zero?

Re: Which category for utilization is a debt consolidation loan

Anonymous — Mon, 09 Jun 2014 19:52:12 GMT

@jackg wrote:
Thanks but will my CC debt utilization drop to zero?

If you pay off your CCs, and keep them paid off, then CC utilization will be zero.

If the source of the funds is another revolving account, for example a BT offer from a CC, or an LOC, then your revolving utilization will NOT be zero. In the case of a BT offer from another CC, your CC utilization would not be zero for very long.

The issue in score gains is revolving vs. installment, since the utilization of these two are scored separately.