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Will consolidating credit cards/loans help/hurt my credit?

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Will consolidating credit cards/loans help/hurt my credit?

Two weeks ago I decided to consolidate all but 1 of my credit cards, it will be paid off within 2 months, and 2 loans into 1 loan. I did this based on everything I read stating it would HELP my credit. I got a much lower interest rate on the loan and will save $500 a month in payments by consolidating too. Today I read some of the "FAQS" here with myFICO and one stated that opening up 1 account and paying off several others could possibly HURT my credit because basically I am keeping the same amount of debt just moving it around. Does anyone know if this is true? I figured paying off credit cards, not closing them, and having a loan instead of high credit card balances, AND saving me $500 a month in payments would help my score? Now I am a little worried as I have a score of 759 now but my goal is to INCREASE my credit score not lower it so I can get a mortgage in the near future.

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Valued Contributor

Re: Will consolidating credit cards/loans help/hurt my credit?

Just don't close, but don't use the credit cards you consolidated.  That will give you low utilization, because an installment loan isn't counted against utilization.  That "should" help your score.  The best score comes from having less than 10% utilization but at least one, but less than half the cards showing a balance.  You may want to rotate which card you let show a balance each month so lenders don't close any.


759 is a great score already, congratulations!  From what I understand, 740 gets you the best mortgage rates.  Reducing your payments by $500.00 a month helps your Debt to Income (DTI) ratio which mortgage lenders will look at. 


Remember, for a mortgage the score is just an entry point.  You will be looked at in detail, even with a strong score.

BK7 Filed 8/11/2009 Discharged 11/23/2009. Purchased new home 4/11/2012
Starting Score:11/16/2009 EQ 566 11/16/2009 TU 538
Interim Score: 12/27/2012 EQ 683 09/17/2012 EX (lender) 670 1/01/2013 TU 701
Current Score: 11/06/2013 EQ 708 11/06/2013 EX 702 11/16/2013 702 11/06/2013 TU 729
Goal Score: EQ 740 EX 740 TU 740
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