I want to consolidate my large credit card balance, but will this new loan hurt my credit anyways because it will become a new big debt?

So I want to eventually get a new car, but first I need to pay down my cards because overtime the utilization has become very large. I’m thinking about consolidating and I know it will increase my credit score, however, is that only temporary until the loan itself hits my score? Basically will that loan just bring me right back down once it hits?

If so, should I wait to do this a week before I go car shopping that way while my credit is high I’ll get approved for a good rate.

(I’m 25, college student barely making it and trying to fix my credit overall.. need a vehicle to get to campus and work).

11 Answers

  • 1 year ago
    Favorite Answer

    First, start with the car - I hope you mean by new car new to you and not brand new off the dealer's lot. You will not get out of this rut if you go out and buy a new car...look for a reliable used car that an independent mechanic has checked (this part is up to you). Next, you may see some improvement by using a consolidation loan (card utilization down, overall utilization stable). However, the new loan will be a drag on your score because it will drop your average length of credit (I am sure you know what happens when that zero hits your length of credit average). As for pre-approved, remember re-approved does not mean you are actually approved, it is just one person's opinion based on a limited amount of date...once they pull your credit report, you can still be declined for any of a number of reasons. In all honesty, if you have been pre-approved to consolidate, why not get approved for a used car loan - the car acts as collateral which will lower your interest rate, If you do go for the consolidation loan, how do you plan on paying for the car? Do you have cash (in which case, you don't need the loan) or are your going to go further into debt with a car loan. Note that the hard pull for the consolidation loan will show up on your credit report and the closer you do it to when you need the car loan, the more questions it will raise. The best thing you can do is put off buying the car as long as possible (even a few months), cut up your credit cards so you don't use them AT ALL (if you have to use them, you have bigger problems and you are going to need more drastic steps to get out of this hole), make as much in payments on the cards as you can (their are two way sto do this, start with he highest interest rate cards first, pay minimums on all but the highest interest and put as much as you can (set a minimum) towards the highest interest card - rinse repeat until that card is paid off and then switch all that payment (no short cuts, ALL that payment) to the next card so you are paying that card's minimum plus the payment on the first card - repeat until all cards are paid off - and DON'T use the cards or use the same philosophy but start with the smallest balance and work up. One saves money, the other fulfills a psychological need (satisfaction)).).

  • MadMan
    Lv 7
    12 months ago

    Sorry but there is almost no chance of you getting a loan.

  • 12 months ago

    Get help from your parents, or another school loan. {You can get a good, modest, brand-new car for under $25,000 and have NO worries about parts, repairs, or breaking down on your commute.} If you have been making minimum payments on time all along, your credit score should be good.

  • Judy
    Lv 7
    1 year ago

    Your debt to income ratio will be as bad as ever.

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  • Judith
    Lv 7
    1 year ago

    1. Buy a reliable old clunker and pay cash for it OR use public transportation and/or bum rides and/or walk if under a mile.

    2. It's time for you to learn how to manage money. Get a book by Dave Ramsey or some other financial adviser. Read it and start putting it into practice.

    3. You can start by paying off debt - NOT by acquiring new debt. Do not consolidate. Concentrate on lowest debt and make minimum payments on the rest. When lowest debt paid off work on next lowest debt. Called the snowball method.

    4. If you can't afford to pay cash for something DONT GET IT.

    5. Get rid of all but one credit card. Make sure you don't owe more than one-third of your allowable limit.

    6. Don't eat out. Brown bag it.

    You are financially irresponsible. Stop it.

  • 1 year ago

    There are many factors. You are reducing the amount you owe on your credit cards which helps you You are getting a new loan which will hurt your score. Bottom line, however is that your credit score should be secondary to saving on interest and paying off your loans. Paying higher interest than you need to is just throwing money away instead of saving it for a car. Get your debt sorted. Then worry about your credit score.

  • 1 year ago

    Applying for the loan will hurt your score.

    But since you'll still have the cards "available" to you, your utilization will be less, even after the loan hits your score. Utilization is the ratio between the total of your balances and the total of your available credit. So even though the total of the balances will be the same, or slightly more, the utilization will be less, because you'll have more credit available to you.

  • 1 year ago

    Your score may be impacted to the negative, but only for a short time. It will eventually reflect the payoff (or paydown, should you decide to keep them) of those cards. If you do pay the cards down to zero, avoid the temptation to run them back up or you may find yourself in a hole you can't get out of.

  • 1 year ago

    Probably a moot point.

    The chances of getting a loan that pays off all of your credit card debt is very, very low.

  • Anonymous
    1 year ago

    You need to understand you cannot borrow your way out of debt.

    Focus on paying off all your debt, increasing your income and far, far less on your credit score. It will take care of itself with years of doing the right things. If I were you, I would only check it every month or two.

    Its not going to "shoot up" but in the long run, it will help assuming you are never late and don't close the other accounts but also don't charge them up. (After an initial hurt from applying). And these things are always delayed.

    Car lenders will look at not just your score but your debt to income.

    You have a history of irresponsible credit use. More debt is not the answer.

    Ive hard credit cards for 33 years. I carried a balance where interest was accruing for a grand total of 3 months. (I got a cash advance for a business loan with a 99% chance of making 6-8 times the cost of interest and it did. Back then, they did not have cash advance fees)

    You have misguided thoughts about paying extra to build credit.

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