debt consolidation loan vs. Revolving accounts ok....Since I'm closing on my home in little over 1.5 months, I was able to get a loan to consolidate my CC debt into one payment and cuts the total per month in half!!! My question is, although this is a loan, doesnt it have a lower effect on my credit over all vs. having revolving accts (store cards, gas cards etc...)? I thought companies look at that (loan) better because you no longer have revolving debt, your payments (intrest) is lower on the loan and no longer trapped in CC debt... can someone shed some light on this? TIA!
It depends upon how the "consolidation loan" is labeled; (installment vs revolving). You will have two factors working here: 1) You have lowered the utilization on your (revolving CC accounts), this will have a strong positive factor on your credit score. The effect depends upon how high your utilization was before paying them off. 2) Your "account history and average will drop, this is due to the new account for the consolidation loan. This will have a minor negative effect on your credit score. 3) You will also be adding an inquiry to your report; this will have a minor negative effect on your score. 4) You have not changed the total debt outstanding, and your new loan will show a high balance to loan amount. This will pull your score down a bit also. Overall, if this loan is an installment type, and reported that way, then your score should increase some. It will not be a dramatic increase, as you now have other factors pulling it down right now. But..if your interest rate is lower, then this may be a good financial move. Just make sure you do not run up the CC balances.
thanks! Yeah it should be reported as an installment loan and I have never been late with any of the accounts that I paid off and they were in great standings. I pplan on NOT using these cards again (not gonna close them but I have cut them up). I'm thinking this not going to effect my credit much at all. I was approved for the loan back in Feb.07 and it showed the inq back then so it will not show up today. The good thing, is when they pull my CR in 3 weeks or so, maybe the loan will not be reported but I've already disputed the balances of the acct just paid off to update the CR!
That's all great, the reported CC balances can take a while to show on your report. It can take a while, depending upon the timing of your statement cycles, and their reporting cycles. Just be aware that there can be a lag time before your reports show a $0 balance reported. The installment loan will probably report, but that could also take a while, for the same reasons as reporting balances.
