 TITLE: What You Need to Know About the New FICO<sup>®<\/sup> 10 Scores CONTENT: Personal Loans Might Lower Your FICO® 10 Score\n----------------------------------------------\nEarly reports about FICO® 10 revealed that personal loans would be treated differently than they were in prior FICO® versions, and that consumers might be penalized simply for having personal loans on their credit reports. This is a notable difference in how FICO® Scores have traditionally treated personal loan accounts.\nPersonal loans, sometimes called signature loans, are unsecured installment loans that are commonly used to pay off credit card debt. This process, called debt consolidation, involves taking out a personal loan for the purpose of paying off higher interest credit card debt.\nDebt consolidation has long been recognized as not only a smart financial move, since interest rates on personal loans can be much lower than those on credit cards, but also a smart credit score improvement strategy. When you convert revolving credit card debt to an installment loan, your credit scores may improve. Even under FICO® Score 10, this strategy is still a good idea if you're trying to eliminate expensive credit card debt.\n\"While there are certain high-risk consumer behaviors associated with the use of unsecured personal loans, there are also circumstances where a consumer's FICO® 10 and FICO® 10 T score can benefit from the presence of an unsecured loan,\" says Dornhelm.\nOne notable exception, however, is if you use those newly paid off credit cards to make new purchases—building up new balances while you're also paying off the consolidation loan. In this situation, your score will likely take a hit under FICO® 10. This emphasizes the importance of avoiding a scenario where you pay off or pay down credit card debt with a personal loan, but then get right back into credit card debt again. END