I am in a stinky situation where I accumulated lots of debt by paying my tuition fees on my credit cards and now they are just killing me with interests. Being on a visa, I was not eligible for a federal loan, therefore I went with the next worst thing I knew.

As of now my credit score is just above the "don't even look at it" level and I am looking for approaches to improve it. I am able every month to do all payments in time and I never skipped one, however, I pay ~$850/month just paying the minimum of all cards together.

I did read online, and in this post, about credit settlement and various options moving balance around, however, I have 6 cards with a total out of ~35k. I emailed a credit counselor who suggested their program where I pay them ~$880/month and I'm done in 5 years. however, I also thought about a personal loan to consolidate my debt.

my question is: if I get a personal loan of 20-25k (I don't think I can get much more than that), I'll pay it off in less than 5 years, and I will use it completely and exclusively to close two or three of my highest credit cards. This would increase my available credit of ~20-25k, which I read is really good for the credit score. now, using credit karma's simulator, if I paid off ~20k I would increase my credit score of about 100 points...however, how does the fact that I got a loan for that much affect the credit score in first instance?

is the payoff of paying out so much at once bigger than the initial dip that the credit score would get for obtaining a loan?

  • 1
    Moving money around does not reduce your debt. Consolidation only makes sense if, by consolidating, you lower the interest rate you're paying on the money; you still have to pay it all off.
    – keshlam
    Commented Oct 21, 2015 at 23:40
  • the interest rate would be reduces since the loan would be paid off in 5 years or less
    – TriRook
    Commented Oct 21, 2015 at 23:43
  • 3
    Are you trying to save money on interest or to improve your credit score? Moving your debt from a revolving line to an installment line will probably effect your score, but it should not be a primary concern, your debt emergency is.
    – VBCPP
    Commented Oct 22, 2015 at 0:01
  • my primary goal is to reduce my debt as soon as possible..which then would reflect on an increased credit score.... and, if I can do that, then as a consequence I will save money....my main issue is that I don't really know which one is the best strategy or which ones are the short/long term consequences on the credit score
    – TriRook
    Commented Oct 22, 2015 at 0:08

1 Answer 1


A consolidation loan, as comments suggest, is really only helpful if it drops the rate as well. In your situation, you'll gain some score points for the fact that your utilization will drop as well.

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