Do Debt Consolidation Loans Affect Your Credit Scores and Rating?
When it comes to your credit, every single thing that you do financially has an impact on your credit score.
With that in mind, you have to know that some things have a more pronounced effect on your credit than other things.
The idea is to give yourself the best credit over the long run and you need to have a credit history that shows that you're a responsible financial consumer.
So how do consolidation loans factor into all of this? Many people don't want to go the consolidation route because they believe that it will harm their credit rating to a great extent.
The fact of the matter is that consolidation loans do have a negative short term effect on credit scores.
When you first take out the loan, it will go as a mark against you, but there are other factors that will improve as a result of taking out a consolidation loan.
Your credit is determined by how much total debt you have, the number of open accounts you have, the ratio of debt to available credit, your payment history, and a host of other factors.
When you consolidate your loans, you are going from having many different open credit accounts to having just one bigger loan.
In addition to that, you are starting the long process of getting yourself out of debt for good.
This is the thing that will have the greatest impact on your credit score and since consolidation gives you a fighting chance at making this happen, it is in your best interest to check it out.
Likewise, many people benefit from a credit standpoint because consolidation takes away the missed payments and late payments that they had been suffering from.
When you have lots of different credit cards, it can be quite easy to miss a payment here and there.
This will bring your score down quickly and it will have a negative impact on your credit history for quite a few years.
If you want to improve your credit, you need to do something to make sure that these missed payments don't happen.
With consolidation, it is much easier to get organized and stay on top of things.
The short term negatives of taking a consolidation loan are more than canceled out by the long term positives.
For people who use consolidation to get out of debt permanently, your credit will be at its highest in the end.
With that in mind, you have to know that some things have a more pronounced effect on your credit than other things.
The idea is to give yourself the best credit over the long run and you need to have a credit history that shows that you're a responsible financial consumer.
So how do consolidation loans factor into all of this? Many people don't want to go the consolidation route because they believe that it will harm their credit rating to a great extent.
The fact of the matter is that consolidation loans do have a negative short term effect on credit scores.
When you first take out the loan, it will go as a mark against you, but there are other factors that will improve as a result of taking out a consolidation loan.
Your credit is determined by how much total debt you have, the number of open accounts you have, the ratio of debt to available credit, your payment history, and a host of other factors.
When you consolidate your loans, you are going from having many different open credit accounts to having just one bigger loan.
In addition to that, you are starting the long process of getting yourself out of debt for good.
This is the thing that will have the greatest impact on your credit score and since consolidation gives you a fighting chance at making this happen, it is in your best interest to check it out.
Likewise, many people benefit from a credit standpoint because consolidation takes away the missed payments and late payments that they had been suffering from.
When you have lots of different credit cards, it can be quite easy to miss a payment here and there.
This will bring your score down quickly and it will have a negative impact on your credit history for quite a few years.
If you want to improve your credit, you need to do something to make sure that these missed payments don't happen.
With consolidation, it is much easier to get organized and stay on top of things.
The short term negatives of taking a consolidation loan are more than canceled out by the long term positives.
For people who use consolidation to get out of debt permanently, your credit will be at its highest in the end.
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