clearing credit cards with loan, how does it affect my credit score?

paul332

Hi,

I can save a lot by getting a personal loan and clearing my credit cards. The problem however is that in a few months time I will need to get a £25,000 personal loan for home improvement.

I am not sure how getting a loan for clearing my credit card balance may affect my eligibility to get further loan. If I know it does not affect it negatively then I will go ahead, will get a loan and clear my credit balance and then in a few months apply to get 25K for home improvement.

However if I know that it may affect it negatively, then I will put a hold on it, will apply for 25K home improvement first and only then once I receive the loan, will try to get a loan to clear my credit balance. That 25K is the priority for me for an essential work while clearing the credit balance is only to spend less.

So the question is, will getting a loan to clear my credit card balance make my chances to get further loan slimmer? It is correct that I will getting loan but it will reduce my credit card loans to zero. So I am confused what can be the effect of this on my credit score.

Appreciate any advice.

Thanks

Paul

anna42hmr

It may make it harder, but may not also. Sorry for the vague response, however there is no one "credit score" so no one will be able to give an exact answer.

All lenders have their own internal lending policy and criteria, and whilst they use info on the credit reports they use that to determine your risk against their requirements,

It can also take some time to show on your credit report what has been done, depending on each card provider. So for instance you can apply for a loan use the money to pay off the cards, but if it takes a month or two to show the cards as closed by the card provider could look like you have more outstanding debt than you do. So the loan company could consider you a greater risk.

grumbler

paul332 wrote: »

I am not sure how getting a loan for clearing my credit card balance may affect my eligibility to get further loan.

Negative effects:

• A credit search - minor and last for 3-6 months only.
• Increase in the total credit available - irrelevant if the loan amount is just to pay the CCs off, you close the CCs and wait until this shows in your credit files.