A debt consolidation can have a positive and negative impact on your credit score. It’s easy to acquire too much debt. Some people have little self control and can’t control their spending. Meanwhile, others fall upon hard times due to unanticipated circumstances (loss of employment, illness, disability, etc.)
As a result, some are unable to maintain regular debt payments, or forced to live off credit. Fortunately, there are ways to eliminate high-interest debts and improve your credit.
Debt consolidation loans and programs have helped millions of people. Years ago, using a debt management company to consolidate bills had a negative impact on one’s credit score. Creditors would report “third-party assistance” to the credit bureaus. In turn, debtors had difficulty obtaining future creditor. This isn’t the case today. With so many reputable debt management companies, you can consolidate your bills and improve your score
If you’re using a home equity loan or line of credit to pay off debts, a slight credit score decrease may occur initially. However, once you begin to pay off credit cards, student loans, and other personal debts, your score will gradually improve.
Unfortunately, the positive impact of a debt consolidation is conditional. To maintain a good credit score, you’ll need to pay the debt consolidation loan on-time, and fight the urge to acquire new debts.