Debt Consolidation Success Stories; Did It Boost Your Score?

[Yasselife]

I recently went through the process of consolidating my credit card debt into one personal loan to lower my interest rates and simplify my payments. I’m curious to hear from others who have done the same.

Did your credit score jump right away or did it take time to improve?

How did it affect your utilization ratio and overall credit profile?

Did you keep your old credit card accounts open or close them, and looking back, would you do it again?

I think hearing different experiences could really help people who are on the fence about taking this step, so please share your numbers, timelines, and any tips for making the most of the credit score boost after consolidation.

[Realist]

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@Yasselife wrote:

I recently went through the process of consolidating my credit card debt into one personal loan to lower my interest rates and simplify my payments. I’m curious to hear from others who have done the same.

Did your credit score jump right away or did it take time to improve?

How did it affect your utilization ratio and overall credit profile?

Did you keep your old credit card accounts open or close them, and looking back, would you do it again?

I think hearing different experiences could really help people who are on the fence about taking this step, so please share your numbers, timelines, and any tips for making the most of the credit score boost after consolidation.

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It never hurts to consolidate debt if it can improve your position.  You should always be striving for efficiency improvements.  Furthermore, if you didn't already have a fixed loan in place, auto, home, personal, etc, this was a good move in acquiring one.  It diversifies credit type, which is a benefit on a credit profile.  It shows fortitude to a lender that you can handle multiple types of debt, sometimes at once.

As for utilization ratio, it's not a revolving credit line.  It's a factor that will be weighed against your ability to pay.  Debt vs income, and whether you can realistically afford it.  I don't recall exactly the last time I utilized this play, so I don't recall exactly what occurred with my FICO score then.  But, what I do recall was within a very short timeframe, we already had a home, and the opportunity to upgrade into our next home.  By doing this, it wasn't contingent, it was that I could carry both mortgages simulatiously at that moment in time, and just sell the first home after we had already moved into the second.  Then not too long after, we took out a loan for one vehicle, paid a modest cash amount for another (both which improved fuel efficency), and then financed a "toy" (useful, but it was still an unnecessary recreational loan).   So, that's a lot of credit abuse in a short amount of time.  The FICO score did not plunge, I do know that.  Instead I was welcomed by each and every lender at the best interest rates.  But after that, I took a nice long break.   During that time, we just used the credit cards responsibly, and as usual.

Some of those credit cards from those days, are some of my more older aged accounts today.  Since they held no AF, there was never a reason to close them.

If the move you are about to make, improves your life, your situation, your payment position, it's almost always worth pursuing.  Everything is about efficiency, and when you achieve enough of it, you can splurge a little on the stupid "toy" stuff.  👍

I'll give one more example later in life.

We were able to splurge a little more later in life and purchase multiple ATV's.  The package price was X.  The lender, said since you already qualify for this entire value, why not just finance all of them with individual loans, incase you ever want to pay them off one at a time, or sell them off in the future, one by one.  Additionally, you get the option placing multiple paid on and paid off loans, onto your credit report.

She outsmarted me in that situation, and I decided that was great advice.  In addition to this, I kid you not, she said since she had to pull my credit report anyway for the loans, would you like one of our credit cards?   That's a credit line I still hold today.  Keep building out that credit portfolio.  That's what the lenders want to see.

[ForwardLooking]

I did a consolidation loan some years ago and was able to use it as a tool to become debt free.  I did help improve my scores slightly, but I still had an ugly past, so the needle did not move too much.  The interest rate was high, but still less than credit card rates.  Move forward 6 months, I was approved for a Discover it card with 0% interst on balance transfers.  I was able to use the balance transfer from the card to pay off the consolidation loan and take advantage of the 0% rate to quickly pay down the debt within the intro timeframe.  My scores tanked at that point because my revolving utilization was high, but they quickly recovered as I payed down the card.  Fast forward a few years, and scores have completely recovered and I am in the 720 ranges.  I still have some ancient marks on my reports scheduled to drop off within the next few months, and I expect my scores to move into the 800 ranges.  Ironically, my mortgage scores are extreamly high, even with the old derogatories, and I am not in the process of closing on a house.  My Experian experian mortgage score is currently at 805 and my middle score is 720.

For me, this was a "Finances over Fico" decision.  I was tired of constantly being in debt and was willing to sacrafice my score over the short run if it meant I was on a more healthy financial path.  I swore off of carying short term debt and focused on paying everything down.  The only debt I carry now is my truck loan and soon to be a mortgage after I close soon.  I still use credit cards for almost everything, but I pay them off weekly -- it just became part of my Saturday morning coffee drinking ritual.  The real secret to improving scores, at least for me, was to change my attitude towards debt and spending.  The consolidation loan, and later 0% balance transfer, were just tools to help get me there.  The real boost to my scores came over time from me not racking up debt again after consolidating.

[Yasselife]

@Realist 

Thanks for taking the time to share such a detailed breakdown; I really appreciate it. Your point about efficiency being the main goal resonates with me a lot; I went into this consolidation with the same mindset, aiming to simplify payments and improve my position rather than just chasing a quick score jump.

I also like how you explained the credit mix benefit; I hadn’t thought about it as a way of showing lenders you can handle multiple types of debt at once. That’s encouraging. For now, I’m keeping my older no AF cards open for the same reason you mentioned, there’s no downside to letting them age and continue helping my profile.

Hearing your examples about responsible use after consolidation is motivating; it’s a good reminder that the real win is in the habits that come afterward.

[Yasselife]

@ForwardLooking 

Thanks for sharing your story; I really like the “Finances over FICO” perspective. That mindset shift is something I’m working on too; for me, the goal was to simplify and get into a healthier long-term position rather than chase an immediate score jump.

Your experience with using a 0% balance transfer after the consolidation loan was smart, and it’s good to hear how you managed the short-term utilization hit while keeping your eye on the bigger picture. I also agree that the biggest boost comes from the habits after consolidation; not racking debt back up is key.

Congrats on getting your mortgage scores that high even with some old marks still hanging around. That’s definitely motivating for me as I stay on track with my own payoff plan.

[MrsCHX]

Presuming you pay off the credit cards with the loan proceeds...your utilization will be 0%? Or something? The loan itself doesn't count toward utilization; that's for revolvers. 

If the main reason your score is depressed is revolving utilization, you'll likely see a huge jump. If there are other reasons you have a dirty file...less so. 

I have an almost 7-year old Chapter 7 so I'm in a "dirty file bucket". 

I have student loan late payments that are, thankfully, going to hit 7-years soon but again..."dirty". 

As my utilization has decreased, I've seen tiny changes. 3 points here, 7 points there. I paid off the last of my cards last month after taking a loan from Lending Club. I am waiting for those to report for August, then I'll be AZEO, so we'll see. 

My son is 25. A collection from when he was 18 just aged off. His score increased 60 points (FICO8 not Vantage). But that's because the rest of his report is pretty uneventful. He's doing well with his $300 Capital One card

[Yasselife]

@MrsCHX 

Thanks for sharing your experience, that really helps put things into perspective. You’re right; utilization is the main factor for me, so I’m hoping for a decent jump once everything reports. I don’t have any bankruptcies or major negatives, so my file isn’t ‘dirty,’ just weighed down by high revolving balances. It’s good to know the loan itself doesn’t count toward utilization.

I’ll keep the cards open after paying them down, so I should benefit from the lower utilization while keeping my history intact. I really appreciate you pointing out how the small score gains add up, and I’ll be watching closely over the next month to see how things shake out.

[dfwxjer]

If you consolidate cards that are maxed out, or have high utilization overall, then the consolidation loan should significantly lower the utilization which will help the score jump. Depending on your profile it can also help by establishing a different type of tradeline. 

That said, this is a slippery slope. Determine what lead to the debt in the first place, and make sure it's not a behavioral problem. It is extremely common to see people consolidate their credit cards with a personal loan, and then immediately run the cards back up because they didn't fix the behavior that lead to the debt in the first place. The dopamine hit of seeing their cards "paid off" can give people a false sense of security where they think they're back in a good financial position. 

[Yasselife]

@dfwxjer 

Thanks for the insight; that’s a great reminder. For me, the main goal with consolidating was to lower utilization and simplify everything into one payment, not to create room to spend again. My behavior during the time I racked up debt was erratic because of mental health struggles. I’m a combat veteran with PTSD and bipolar, and at the time I wasn’t taking my medication and went through a period of psychosis; something I didn’t even realize was happening because outwardly I looked and felt normal. Before that, I had been managing my cards responsibly with 0 debt.

The important thing is I’ve identified the problem, I’m back on my medication, and I’m stable again like I was before. Now with the debt consolidation loan, I’ve taken back control. I’m keeping my accounts open for history but not using them for daily spend, and after all fixed expenses (including groceries and child support), I’m still able to put aside a little over 20% into savings each month. It already feels like I’m back in a good place, and I’m curious to see how the score reacts once everything reports.

Budget is in place and in good health. I will pay off the loan in 36 months.

thank you!