Should I consolidate?

Anonymous · ‎12-10-2020

Hello!

I am trying to get my credit score-middle currently at 640 as high as possible in the next 6-9 months as I plan to buy a home.

In terms of debt that I wish to cut in half by then, I have an installment loan at 12K, and two credit cards one at just under 4k and the other about 2K. The credit cards are at their max probably why my scores are where they are at. All 3 are at a high and fairly comparable interest rate. I keep getting offers from the installment company that I am qualified for a higher amount, pay off the old loan and consilidate other debt type offers. Thoughts on this? If I pay off the other two credit cards and have one installment loan at roughy 18K I assume would increase my scores, but would another hard credit pull ding it? Any thoughts would be much appreciated!

AndySoCal · ‎12-10-2020

Here is a link from Nerd Wallet on debt consolidation loans

https://www.nerdwallet.com/article/loans/personal-loans/current-debt-consolidation-loan-interest-rat...

Consider all the costs etc versus the savings from doing so then make a decision.

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Anonymous · ‎12-10-2020

The only thing adversely impacting your scores when looking at your revolving debt and installment loan debt would be the revolving debt. That $12k you owe on an installment loan could be 10x that at $120k and it wouldn't be hurting your scores any more. Conversely, if your CC debt is maxed out at $6k, if you were to pay that down to an ideal place you could easily pick up (say) 70-90 points on your Fico scores. If you have the ability to pay down half of that, you'd likely be looking at gains around half of what I estimated. The last thing you want to do is apply for a new loan or any credit if your mortgage app is only 6-9 months away. Realistically figure how much of that revolving debt you can pay down by then.

To recap: Paying down $3000 toward your revolving debt could be good for 35-45 Fico points. Paying down $3000 on your installment loan debt could be good for 0 Fico points. From a scoring perspective, that seems like an easy decision to me.

Anonymous · ‎12-10-2020

Thank you much I will check it out!

Anonymous · ‎12-10-2020

Thank you. that makes sense!