I want to pay off a high rate credit card. What would be the better choice to help preserve my credit score?

Question

I am debating between a personal loan at a much lower interest rate or transferring the balance to a new card @ O% apr. I am overly certain that I could pay the balance before the 0% period is over. The transfer fee seems worth it since it is less that one month's interest charge. So my question is which will hurt my credit less?

Answer 1

There is a potential advantage to either option when it comes to your credit score:
Credit card: It increases the total limit on your cards, thus decreasing your utilization rate (credit used / credit available on credit cards). A lower utilization rate is good for your score.
Personal loan: If you have not had a personal loan in the recent past, this will add to the diversity of your loan types. That is a good thing for your score.

It depends on your specific circumstances, but I'd guess that the 2 options would be about equally good for your score. If you're certain you will pay off the card before the rate goes up, that is probably the better choice since it would be less total interest.

Answer 2

As long as you close out the high interest credit card, rather than letting it sit there, you should come out even when you get a new credit card. I'm not sure how a loan would look in comparison, but its good to have a credit card available. If this new one will have a lower rate after the introductory period than the old one has, I'd go that way.

Answer 3

If I were you, I'd do the credit card. I think you're more likely to get it (and thus have fewer inquiries on your report) and the trasnfer fee seems to be acceptable.