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Loan Balance transfer and score effect

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Anonymous
Not applicable

Loan Balance transfer and score effect

I have a discover loan for 15k @ 11% that is about 3 months into the loan. I opened a State farm credit card with an 18K limit @ 9% and a promo offer of no balance transfer fee and 0.9% for 18 billing cycles. I'm wanting to transfer the loan balance to the card and divide the balance over the 18 months. Any idea how this move will play out with my score? My thought is I will get an increase for the loan payoff and a decrease for the credit card balance increase. Just don't know if it will be a wash, a great idea or a really bad move. Any thoughts? Thank you. 

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Anonymous
Not applicable

Re: Loan Balance transfer and score effect

First off it is a great move from a money saving standpoint to transfer your balance.. is there anything stopping you from getting the Chase Slate card? It is offering 0% and no balance transfer fee for 15 months... it will likely lower your score if you choose to teansfer the balance as it will make the utilization rate more than 50% on your State Farm card. Ideall you want Utilization to be less than 10%

Message 2 of 5
Anonymous
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Re: Loan Balance transfer and score effect


@Anonymous wrote:

@I have a discover loan for 15k @ 11% that is about 3 months into the loan. I opened a State farm credit card with an 18K limit @ 9% and a promo offer of no balance transfer fee and 0.9% for 18 billing cycles. I'm wanting to transfer the loan balance to the card and divide the balance over the 18 months. Any idea how this move will play out with my score? My thought is I will get an increase for the loan payoff and a decrease for the credit card balance increase. Just don't know if it will be a wash, a great idea or a really bad move. Any thoughts? Thank you. 


There's no way to predict the short term effect on your score, because you have not supplied us with your total credit limit (all cards together) and your total current CC debt.  Those two numbers are divided to get your total (aggregate) CC utilization (which is a percent).  The total util is overwhelmingly the biggest driver of the FICO factors related to CC debt.

 

You have also not told us whether the discover loan is your only open installment loan, or whether you have others.  This is another reason we can't predict what will happen.

 

Are you planning to apply for credit (e.g. buy a car, buy a house, etc.) during the next 18 months?  If not, there's no reason to care what happens to your score in the short term.  Instead, you should do what makes financial sense, with the certain knowledge that you will be in much better shape 18 months from now.

 

PS.  Loan payoffs do not in themselves increase your credit score; they can in fact lower it.  Do the right thing financially with respect to your loan (without worry about whether it will help or hurt your score) and then we can tell you how to create a history of installment loans that FICO will love and at almost no cost to you. 

Message 3 of 5
Anonymous
Not applicable

Re: Loan Balance transfer and score effect


@Anonymous wrote:

First off it is a great move from a money saving standpoint to transfer your balance.. is there anything stopping you from getting the Chase Slate card? It is offering 0% and no balance transfer fee for 15 months... it will likely lower your score if you choose to teansfer the balance as it will make the utilization rate more than 50% on your State Farm card. Ideall you want Utilization to be less than 10%


Nice response, TD.  Slight caveat though: there's no score advantage to keeping individual utilization (each card considered separately) at < 10%.  The 10% figure you are thinking of is for total utilization (all cards and their credit limits together).  And strictly speaking, the penalty for total U begins at 9.0001%, so consumers wanting every extra point should really aim for a total U under 8.99%.

 

The evidence thus far is that penalties for individual U do not begin until 50%.  A few people (like SouthJamaica) think they might begin sooner (30%), but even these folks typically refer to the score loss they believe might happen as "just a few points."

Message 4 of 5
SouthJamaica
Mega Contributor

Re: Loan Balance transfer and score effect


@Anonymous wrote:

@I have a discover loan for 15k @ 11% that is about 3 months into the loan. I opened a State farm credit card with an 18K limit @ 9% and a promo offer of no balance transfer fee and 0.9% for 18 billing cycles. I'm wanting to transfer the loan balance to the card and divide the balance over the 18 months. Any idea how this move will play out with my score? My thought is I will get an increase for the loan payoff and a decrease for the credit card balance increase. Just don't know if it will be a wash, a great idea or a really bad move. Any thoughts? Thank you. 


In order to answer your question we need to know:

 

1. how many other credit cards you have, plus limits and balances

2. whether you have any other loans out, plus original amounts and balances

3. the term of the discover loan

 

Bear in mind there are 2 choices in terms of paying down the loan: (a) paying it down to zero or (b) paying it down to $1000 or so but not zero. Your answer to the above questions will help us give you advice as to score effect

 

 

 


Total revolving limits 741200 (620700 reporting) FICO 8: EQ 701 TU 704 EX 685

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