Does consolidating debt affect credit score

But of course, before you can decide if it’s the right choice you have to answer some important questions.One of the most important is, “does debt consolidation hurt your credit score?Some plans require you to become delinquent on your accounts in order to enter into the program.Missing even one payment on an account will hurt your credit history and your credit scores.Credit reporting agencies issue credit scores to all consumers based on your credit history.Lending institutions use these scores to determine your level of risk on a loan or line of credit.A better option may be to find a reputable non-profit credit counseling company near you that can enroll you in a debt management plan.They can help you negotiate terms with your creditors and assist you with making sure payments continue to be made on time during any changes made to your payment schedule.

If you’re not familiar with the process, here’s a very brief explanation: Your credit report contains information about all the credit accounts you’ve ever had, including mortgages, auto loans, credit cards, student loans, etc.The principal reason is you will have a new inquiry and huge installment loan appear on your credit report, even though you also will have much lower debt-to-credit ratios on your credit cards.The potential underwriting risk that you present to a new lender is measured in conjunction with your credit score and will now have to incorporate that you have the chance to begin adding to your credit card balances again.The cliche about rearranging the deck chairs on the Titanic came to mind when I read your question.Debt consolidation won't address the real problems that may sink your credit rating!

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