Balance transfer cards vs personal loans - one is way better for your credit score

I spent the last 2 years paying off $8,000 in credit card debt and tried both approaches. First I did a balance transfer to a 0% APR card from Chase and thought I was golden. But then I messed up the timing and missed a payment by 2 days, which hit my score by 40 points. Switched to a personal loan from my credit union at 9% interest and my score actually went up 15 points in 3 months. The reason is simple: a personal loan shows up as installment debt, not revolving, so your utilization ratio drops way faster. Plus the fixed payments mean you can't just rack up new charges on the same card. Did anyone else see a bigger score jump with a loan over a transfer?

3 comments

3 Comments

williams.sage18d ago

Stopped scrolling to say YES thank you. Personal loan changed the game for me too. I did a balance transfer first and my score barely budged because I still had high utilization on other cards. Then I got a 6% loan from my bank and my score jumped 30 points in two months. The fixed payments force you to actually pay it off instead of just moving the debt around. Plus it looks way better to lenders when you have a mix of installment and revolving credit. Balance transfers are just a bandaid. Personal loans actually fix the problem.

murphy.aaron18d ago

Did you read that NerdWallet article comparing personal loans to balance transfers?

elliot_gibson2718d ago

@murphy.aaron I actually gotta push back a little here. My buddy did a personal loan through his bank and his rate was 9%, meanwhile I did a balance transfer with a 0% intro APR for 18 months and paid a 3% fee. Over a year I saved like $400 in interest vs what he paid. It really depends on your credit score and how fast you can pay it off. @murphy.aaron did you end up going with one or the other?