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As documented elsewhere, I'm paying off debt on credit card accounts totalling roughly 15K and at an average interest rate of roughly 20%

My ultimate goal is to get a loan in the 5-8% range with fixed repayment. I currently only qualify for loans in the 25-30% range.

The question is this: Will converting my revolving credit to a 30% unsecured personal loan for 2-3 months improve my credit score enough to qualify for a lower interest rate loan? There are no derogatory marks on my credit report. Just high utilization and on time payments, but a moderate number of declined application for 0% intro balance transfer cards.

Alternate wording: Is it feasible to use a high interest rate loan to improve my credit enough to get a low interest rate loan by eliminating credit card debt?

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  • Trading lower interest loans for higher interest loans is... backwards and will cost you more money, thus slowing down your efforts to repay. – RonJohn Dec 7 '20 at 1:30
  • What is the sum of the total lines of credit on the cards? (How much more than 15K is available?) Also, are the current balances lower now since it's been 2.5 months since you asked this question? – TTT Dec 7 '20 at 5:07
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If you’re paying on time with no derogatory remarks, I’d guess that your debt to income is just too high to get a better rate.

Don’t give up a lower rate for a higher rate consolidation loan - there is no guarantee you’ll get that even lower rate you’re after. Just keep paying your bills on time.

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Generally, it is not recommended that you apply for higher rate loans to pay off debts, but if you have no other choice, that may result in a temporary hit to your credit. Applying for new loans and using it to pay for older ones would technically lower your average account age and shorten your credit history which may result in a lower credit score.

In the long run, if debt consolidation helps you make your finances more manageable, it can indeed help bring up your credit score. This means that the temporary initial hit on your credit score is worth the long-term benefits. This would only be the case assuming that this would help you pay all your debts on time and continue to do so in the future.

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