Will credit card debt consolidation lower my credit score?
The reason that many people look at debt consolidation is that they need help paying all of their bills. In a lot of cases, people who are considering this option have already missed a few payments, or have credit used to credit extended ratios that are so high their credit score has already taken a hit. Therefore, it’s important to know whether or not credit card debt consolidation can lower or improve a credit score.
The truth about credit card debt consolidation
Truth be told, there are a lot of stories about people who used a disreputable lender and saw their credit score go down after a debt consolidation. In many cases, this was the result of fraud; the lender did not pay off the old loans as promised. Careful research can help to avoid this problem, however, as can taking the debt consolidation loan and paying off your old loans on your own.
In other cases, a consumer took out a consolidation loan that didn’t meet their needs. If the new loan has payments that are too high, then the odds are good that the consumer will miss a few payments and see their credit score suffer.
With a reputable company, credit card debt consolidation can actually help to improve a credit score. At the beginning of the process, a consumer’s old debts are completely paid off. While not every bank that assigns a credit score does it the same way, there is some credible evidence that paying off a credit account can help to get any bad information that the account placed on a credit report to fall off faster. This could mean that a person would see their credit score improve after a year or two instead of the typical three to seven years.
By only having to make one payment for all of a person’s loans, it is a lot easier to keep track of bills coming in every month. That means fewer missed and late payments. If you are someone who frequently finds themselves forgetting to make a payment, a credit card debt consolidation loan could alleviate a lot of stress and help you to improve your credit score.
Finally, if you choose a loan that allows you to pay off debt faster, you’ll see your credit score improve as your debt gets paid off.