@Anonymous wrote:
Ok, I’m thinking of taking a loan at my CU to pay off my cards and a couple grand extra for some projects at home. It’s kind of a no-brainer as the interest rate is far better than that on my cards, and I have preapproval, just have to tell them OK.
My question is this:
Currently I’m at about 58% aggregate UTI, a little under $7800 outstanding across my cards. I’m looking to take $12k out. I’m interested to hear theories on what will happen with my scores. All my cards but one will be at zero, I’ll be dropped into AZEO. But I’ll have a new loan out and will actually have more debt than I did before. Do you think that the new loan at full UTI will be outweighed by my cards all falling through 3 scoring thresholds and all but one sitting at $0? Am I looking at score increases for doing this? I’m not familiar enough with the effect of loans vs cards when it comes to scoring to be able to really come up with a knowledgeable answer.
As I said, it’s pretty much a good plan as I modeled it and I’m looking at $238/month for 5 years (with no penalty for paying extra ahead, which I will do in order to pay it off in between 1-2 years, although the extra money comes off the end of the loan - I can’t let it float for years at 8% UTI). I will be paid off sooner than if I just keep paying the cards and I’ll have some new flooring in my house as well. I’m just curious about score changes as a result of doing this - do you think I stand to make a net gain, loss, or break-even in scoring?
Note, there’s no credit mix bonus to me doing this, as I have a loan active already. Any gain or loss would basically be solely on account of the new loan vs the zeroed out cards.
1. You'll lose points for the new loan and gain points for the improved revolving utilization.
2. As to whether it will be a net gain or loss, no one knows the answers to that, and the answers will vary across the spectrum of scoring models.
@Anonymous wrote:
SJ, fair enough. Toward what CGID was saying, being that my AoYA will essentially be unchanged, I’m in agreement that those two factors will be the vast majority of what comes into play. I’m hoping that the negative of one additional TL is more than offset by some very considerable UTI improvements. Thank you.
I hope so too 