How a Debt Consolidation Loan fixed My Credit Score
<p data-sp-element=”content”>Julie Polov was tried to be careful with her money, but it was really hard for her. She was never great at math, and no one ever taught her how to manage a checking account or make a budget when she was growing up. That means t she made a couple of mistakes, such as forgetting to pay a few bills and bouncing a check every few months. Still, she though it wasn’t that big of a deal until she went to buy a new car.Julie had just started a new job, and the car her dad had bought from a friend when she graduated high school was starting to wear out. Julie was pretty sure it wasn’t going to make her daily commute, so she went car shopping for the first time in her life. She was shocked when the dealer told her that her credit was too bad to get a loan. Instead, they offered her a “distressed buyer” rate that was more than double what she had seen advertised online.Julie decided that day that she would finally get her finances under control and learn everything she could about money. By working with a debt counselor, she was able to get a debt consolidation loan that paid off her credit cards and gave her a lower interest rate and monthly payment, saving her money every month. It also, however, helped her fix her credit score.As soon as Julie got the debt consolidation loan, she was able to pay off all of her existing credit card accounts. On the advice of her debt counselor, she left a few of the oldest and largest ones open, but she took the cards and filed them away. By shutting down the accounts of cards she had made late payments on, the accounts dropped off of her credit report.Next, paying off her revolving debts and transferring it into a “standard” loan made it look as if she had very little debt compared to the amount of credit that had been extended to her. This helped to increase her score, since banks believed that she had a low amount of debt, but other lenders considered her a good credit risk.Taken together, Julie’s credit score went up over 100 points in a few weeks. When she visited the dealership again she was able to qualify for the loan she needed to get a new car.