 TITLE: Is a Personal Loan the Same as a Consolidation Loan? CONTENT: How Will a Personal Loan Affect Your Credit Score?\n--------------------------------------------------\nStill another benefit of debt consolidation is the potential for boosting your credit scores. Using your personal loan to pay off credit cards lowers your credit utilization ratio—the percentage of your credit card borrowing limit represented by your outstanding credit card balances. If your utilization on any single credit card or your overall utilization among all cards exceeds 30%, your credit scores can suffer—so paying off your card balances can help your score improve.\nAdding a personal loan to your portfolio of credit accounts can also increase your \"credit mix,\" or the different types of credit you manage. Credit mix can also promote a higher credit score.\nOn the downside, applying for a personal loan typically triggers a credit check known as a hard inquiry, which causes a small, short-term drop in your credit scores. Your scores typically will recover within a few months as long as you keep up with all your bills.\nIf mishandled, a personal loan can also have a more serious negative effect on your credit score. Missing just one payment on any loan is the single event that can do the most damage to your credit score. So when considering a personal loan for debt consolidation or any other purpose, take care to ensure you can afford the monthly payments.\nIf you use a loan for debt consolidation, resist the temptation to run up new balances on the credit cards you paid off with the loan. Managing new card charges along with the monthly installments on the personal loan could blow your budget and undo the credit score benefits of lowering your utilization rate—not to mention defeating the original purpose for the loan. END