Current Events > How badly do consolidation loans affect your credit score?

(+) Yeah! (+)

I've been at the same credit card balances for 3 years, with minimal actual progress.

I have 5 cards, all 5 have a balance, with 4 in use, but chiefly I use 1 card daily.

If I got a consolidation loan, and limited myself to one card (I'm not closing the others, I know that'll negatively affect my score), would the loan itself be bad for my score? I think I'm at the mental point where if I could just earmark 40+% of my paycheck as gone, I'd make better progress.

I don't have rent, or a car note so I have a lot of... Flexible income

Don't worry about your score is not used for anything.

Tyranthraxus posted...

Don't worry about your score is not used for anything.

I just wouldn't want to nuke it, considering I'm mid 600s right now

It's unlikely to significantly affect your credit score positively or negatively. Maybe it could affect it if your loans are some of the older accounts in your credit profile and thus having one new loan replacing them lowers the average age of your accounts. But if you can lower the interest rates you're paying by consolidating then that's much better than any minor impact it would have. The point of a good credit score is to save you money so it's generally counter-intuitive to pay more money for a higher score, especially when the difference in score is negligible

wackyteen posted...

I just wouldn't want to nuke it, considering I'm mid 600s right now

The score isn't used for anything. It's meant for your benefit. Lenders / creditors don't look at your score. They look at the raw data the bureaus used to create your score in the first place. You can have an 800 and still get denied loans because your income isn't high enough or you haven't been working at your current job for an arbitrary number of years.

Kuuko posted...

It's unlikely to significantly affect your credit score positively or negatively. Maybe it could affect it if your loans are some of the older accounts in your credit profile and thus having one new loan replacing them lowers the average age of your accounts. But if you can lower the interest rates you're paying by consolidating then that's much better than any minor impact it would have. The point of a good credit score is to save you money so it's generally counter-intuitive to pay more money for a higher score, especially when the difference in score is negligible

I more just want to get out of debt faster.

Having 1 or 2 targets sounds more appealing than having to focus on 5 targets.

Your score would actually go up because all of your revolving credit that has kept your score stagnant will have been transferred to the loan, thus freeing up your usage.

Definitely look into it. You'll get a set payment per month and likely at a lower rate than your cards.

Tyranthraxus posted...

The score isn't used for anything.

This is absolutely untrue.

wackyteen posted...

I more just want to get out of debt faster.

Having 1 or 2 targets sounds more appealing than having to focus on 5 targets.

Here's my suggestion to you, rather than get a loan.

Get your card with the biggest balance, pay all your other debts with that card (if the debt is another credit card, that's called a balance transfer and you might be better off opening a new account to do it for a promotional offer).

Then every pay check you get, put the entire thing into the card. Don't even leave yourself any for food and rent, host charge that straight back to the card.

Then buy only necessities / very small amounts of luxuries.

I have a friend who got out of $20,000 debt in a year this way.

I didn't know loan consolidation could be a detriment to you score. I actually thought it was the other way, no?