Personal loan affect on credit score?

[Anonymous]

Hi everyone.  I'm new to this forum and am really enjoying reading through all of the excellent advice and info.

I have a decent credit score, not excellent - low 700s, last I checked.  Since getting my score, I qualified for a personal loan through my credit union and used it to pay off my two credit cards that had the highest balances.  I now have three cards with a zero balance, one with a very low balance (will be paid off in the next month), and one with a moderate balance that I plan to attack heavily over the next few months, with the goal of having it paid off early this coming year.  

I'm not clear on how personal loans factor into utilization, or even whether they do.  My credit card percentage of utilization obviously went way down, so that should have a positive affect on my credit score.  But maybe it's a wash with the addition of the new loan?  I'm not overly concerned, as I don't have a need to qualify for anything anytime soon, but am curious.

Thanks.   

[Anonymous]

Hello, welcome to the forum. Loans aren't considered in your revolving credit utilization, and as far as score changes go, that will depend on what your util was and is now. A high cc util will have a greater impact on your score than adding a loan will.

[JoeBJay20]

It would be hard to predict the exact effect without knowing your full report, and even then it wouldn't be clear cut.  You definitely should gain some points from your total utilization being decreased and having a number of cards reporting a $0 balance.  How many points you gained would depend on how much your total utilization decreased.  The effect of the personal loan on your score should be minimal.  Generally you lose a few points when you open new accounts, but you could also gain some points if the loan improved your mix of credit.  Regardless, it would be a single point swing either way, and the gains you got from decreasing your utilization should overshadow any score hit you might take from having the new account. 

[Anonymous]

Thank you!  This is all really helpful... and enlightening.  I just figured out that by taking out the loan, I reduced my utilization from a whopping 52% to 20%.  Still not stellar, but helpful!  (And much less stressful, because it's two payments per month I no longer have to think about!)

Message Edited by muttonchops on 10-19-2009 05:50 PM