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Posted in Paying Your Bills
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Question By
lalanoy

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paying off debt
If I take out a personal loan of $12000 to pay for all my credit card debt, how much impact will this have on my credit score? I will not have anymore credit card debt but I will have a personal loan of $12000. Once I do pay off all the credit cards, which one should I close? Should I close the ones with higher interest, the oldest credit cards or all the newer credit cards?

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first: you will see a drop in your score

Helpful to 13 out of 13 people

any time you apply for new credit or do a new transaction that will move your debt around, you will likely see a drop in your score.  Not having seen your credit report, there is no way to say how much it will effect your score.  After a few months it should bounce back again though.  

After moving that debt to a loan, DO NOT close any of the credit cards.  That would only lower your available credit, meaning that every time you charge on a credit card it will have an even bigger impact on your score.  If you do not want to use particular credit cards, then DON'T use them.  Cut them up, put them in a drawer, What ever. But do not close the accounts, that would hurt you more in the long run, lowering your available credit.  I Personally only carry a balance on cards that offer me 0% or very low interest rate. In general I pay as little as possible in interest and fees over the course of a year.

Closing the oldest cards will lower your score because of the age of your accounts. High interest cards should only be used for a couple of purchases a month and paid off entirely every month.  The same with the newest cards, Pay them off.   The ONLY cards i recommend closing are accounts that charge you an annual fee, and only if you feel that the fee isn't justified by any savings or perks you get for that annual cost.  (i.e. I have a Virgin America Visa Card. Annual fee is $49. But it also gives me 1 free Comapanion Flight a year, so i'm basicly paying $49 for a airline ticket once a year, To me its worth keeping.)

Once you have a handle on the debt that you have incurred try to keep it in check by not charging anything to cards that you don't have a plan in place to pay for. My Rule of thumb: If you can't pay off ALL of your credit cards with the cash you have in your checking and savings then you are living beyond your means: its time to reign in your spending. 

Good luck 

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Helpful to 9 out of 11 people

Instead of trying for a personal loan to pay the credit cards, try instead for balance transfer at 0% interest for a period of no less than 12 months. This is a great way to get the debts paid down.

DO NOT CLOSE CREDIT CARDS!!!! Unless you want your credit score to take a nosedive. Sounds like you have not read the articlse on credit that this site offers.  Please do so or you will be suffering creditwise for the rest of your life.  I now have several credit cards, some with zero balance and a very good credit score because of reading the articles and putting into practice the information contained in them.

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Reply by
brickhouse492

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Helpful to 2 out of 2 people

Me too Jwsister.  I read the articles here and now I have an awesome score for the first time.  It took me years but everything I needed to know, I learned here at creditkarma.  Get advice!

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Don't do Anything Drastic

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If you have a newer card w a high interest rate, can go.  Getting rid of newer cards will improve your length of history.  Since they'd all be $0 utilization won't be a factor.  Now that I've told you what you wanted to hear, this is what you need to know - CLOSING ACCOUNTS IS CREDIT SUICIDE.  People with 850 have $50k+ worth of credit.  Cut up cards, forget them for a while, then reorder a new one.  Leave your cards ie at work.  Get used to being w/o them.

Closing accounts can leave you in Limbo - stuck in bad/poor credit land.  All balances at $0 might leave you stagnated with a poor score also.  0% utilization does not show you USING credit responsibly.  Utilization of 1-9% is where you want to live. 

The loan worries me.  Double trouble if you have an emergency and have to use credit!  $12K is not as serious as it feels.  If you pay $1200, you will move to only utilizing 90%.  Then move to 80%.  

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Removed accounts

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What does removed accounts mean. Do I still owe on them?

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could mean a lot of things.

One collection company removed it because they sold it to another collection agency.  The new collection agency will now report.  That may take a month to a few months.

The collection agency removed it because 7 years have passed.

You need to look at the date it was first opened/reported.  Has it been 7 years?    Keep reading the articles on this site about statute of limitations and credit reporting/collections.

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Credit card

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I have an old navy and a couple of other dept store cards. I have used them a couple of times lately . My score when down about 20 points. What do I need to do?

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Helpful to 1 out of 1 people

you need to pay off the credit cards.  If your score dropped 20 points you must have used a lot on the cards.

There is a lot of reading material on here about credit utilization.    

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Helpful to 1 out of 2 people

if i have debt (bad debt) reported on my credit report and i pay it off how do i get it taken off my report?

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Reply by
brickhouse492

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Helpful to 2 out of 4 people

Unfortunately, the only thing that can remove bad debt from your credit report is time.  I would not suggest closing the account immediately after paying it off.  Ideally, you want that credit card company to report positively for one year! One solid year with no oops or mistakes.  There must not be any late payments and never, ever exceed the available credit.  Now if it is too late and the card is already closed, you can show that your current cards are being handled well.  After you improve your credit, the bad debt creditor might offer you a new card.  That would be ideal.  Sometimes they replace the old data with new data.  Most times they don't .  Most times, you just have to wait...but you can do it. 

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HELP ME!!

ok so i was very young and wild with credit cards but now i'm able to make payments or pay off my debt but i have no idea who i owe, how much i owe and where to find my debt? where or how do i go about looking for it?

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Get a copy of your credit report.  Everything is on there including collection accounts.  

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If you take out the loan for $12,000 and pay off your credit card debt, it will help your score dramatically. As far as credit cards go, you'll want to close the newest credit card. 

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BAD ADVISE From Credit Karma!!!!!!

So I'll make this short but I took the advise from credit karma telling me to transfer my credit card balance to a 12 month 0% interest CC.  I took (2) balances and tranferred them to a 12 months 0% interest credit card as I was instructed by credit karma.  Well, by doing this it lowered my credit score down 31 points!!  This would make anyone upset because I took "Credit Advise" from  credit karma on this one.  I emaled customer support and all they do is bounce around my question and will only say this, " we receive our infomation from the credit bureau" and I sent them another email explaining more in details however received the same email back!

Reply by
Brittx27x

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Sounds like you maxed out the zero percent interest card. What percentage of your credit line were your balances at before hand?

Reply by
NEEDHELP218

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Helpful to 3 out of 3 people

Your score most likely went down temporarily because by opening a new credit card you also added a new hard inquiry to your credit report. The inquiry will stay on for 2 years, but it will only affect your score for about 6 months or so. By adding a new account you also affected your average credit history age. You can't expect huge positive changes to happen right away. Did you close the cards you transferred the balance from or keep them open? If you closed them, then essentially you have the same amount of debt just moved to a new account. Which is why you will see a drop. If you kept them open your score should go up shortly, because while you opened a new account, you are adding to your available credit, just do not spend on the cards until you get more paid off. I've learned/used as a rule of thumb if you are looking for a quick credit jump, you should not open new accounts. If you are just slowly trying to rebuild and don't necessarily need a good credit score right away, then you can take these moves to transfer money around, open new 0% interest accounts, etc.

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