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spy23714

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Would a balance transfer with a new hard inquiry increase my score?
I recently used a credit simulator to try a few scenarios and it brought up a few questions.

To make a long story short, according to one credit reporting agency, I have a score of 717. I currently have about $5,000 in debt spread over two different cards. I'd like to consolidate that and have one monthly payment. My debt is due to being out of work for awhile, but now I'm back at a stable job so my spending is under control.

According to the tracker, if I were to add one hard inquiry, open a new line of credit, and transfer $5,000 to the new card, my score would increase from a 717 to a 753. This seems like a bit of a stretch to me, but maybe it's normal? What would someone wiser than me about credit recommend? Does this increase in score despite adding a new inquiry seem a bit odd to anyone else?

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First, I advise you to be very wary using simulators, especially the one on this site. You need to focus on an make decisions based of FICO scores as most lenders will use them. Unless you want to transfer the balances of the two cards to a ZERO PERCENT card, I see NO REASON why you would do it. A zero percent rate would be the only reason to transfer credit card balances over, unless you have found a much lower rate card. The main thing is, what would the credit limit be on a new card? If you didn't get a high enough limit, you would have to max the card when you transfer the balances over and maxing a card is bad for scores even though it is only temporary. Credit Utilization plays a big part in your scores, but as I said it is only temporary as your balances change and so will the score increase or decreases associated with the balances.

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If you are not finding a ZERO PERCENT or very low card with a nice size credit limit you may be better off considering a debt consolidation loan or personal loan and paying off the cards with that and then you would have just one, lower monthly payment (in most cases). The only thing that you must be very cautious of is to not run the cards back up, if you did it once you may do it again and if you do, then you are in twice as much debt. It is great that you are back to work now and things are going good, but you can never foresee the future.  

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Going the installment loan route would most likely increase your scores by eliminating the utilization on your cards and if you don't currently have an installment loan being reported, it would probably help your scores for the simple act of adding an installment loan. Just make sure that the installment loan will be reported to all three credit bureaus before you apply for it if you go that route. I would not advise closing any credit cards if you pay them off, that would cause scores to fall.

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spy23714

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Enter Your Replying I would be applying for a new card for the consolidation. I've wanted to be part of the AmEx family for awhile (as silly as that sounds), so I would be taking advantage of their 15 month 0% on balance transfer. I can always play the long game and just pay it out as I'm paid. My budget says I should have them paid off by June-ish. I realize that isn't far off and that's probably the best route, I'm just toying with the idea of consolidation. I've wanted an AmEx and the simulator got the wheels turning, although the credit limit not being high enough is definitely a concern of mine. 

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