Does Consolidating Your Credit Card Loans Hurt Your Credit Rating?
Consolidation is an option that many people have taken advantage of. Consolidating loans means joining more than one loan in to one single loan. While it can be beneficial when keeping track of your credit card debt, and sometimes even lower your monthly payments, there are a few things you should know about consolidation before you get on the boat.
There is no simple answer to this. Many people like the advantages that credit card loan consolidation offers. Many do not know all of the repercussions that come with consolidation, however.
The advantage of consolidation is that it allows you a chance of paying off your loans faster. It also offers people with a low or fair credit score to save it from getting worse. Additionally, if you are going to be making a large purchase, such as purchasing a home, consolidating your loan can be beneficial with that.
Some drawbacks are that consolidating your loan will report the additional loans as “closed lines.” This may hurt your credit a little. If you are planning on paying off your debts quickly it will show up as “paid in full” quickly after it is listed as closed, which won’t result in a negative way long enough to really hurt you.
You can pay off your loan quicker with consolidating your loans. Sadly, because you will be paying less than your were originally you will have a record stating that you settled for less than the original balance you legally agreed to pay. When others look up your credit they will see this noted in your report.
When someone looks in to your credit score this note will show up. Future creditors may be concerned with the settlement you did with your consolidation. While your credit score is not actually lower because of the consolidation, it does leave a negative association with it.
There are advantages and disadvantages to consolidating your loan. There is a risk involved with getting a lower loan rate. It is up to you to decide whether it is worth the risk and if the convenience of having one loan to worry about is worth consolidating your loan.
If you are faced with the possibility of bankruptcy verses consolidating your loan, consolidation is the better option, hands down. Consolidation has a much more positive connotation to it. When comparing consolidation to other methods of alleviating debt, bill consolidation will have a better impact on your credit score now and in the future.
At Nitro Credit, we specialize in helping people with credit repair. Through our unique credit management strategies, we’ll help repair your credit and improve your credit score.
Tags: Credit, credit fix, credit repair, credit report
