Will Debt Consolidation Hurt My Credit?

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Well, the Answer Depends on You! If you are heavily in debt and have late payments along with defaulted loans on your credit report, you need to do something NOW to take care of the problem. Debt consolidation is one option that could work for you. You may have heard that consolidation will hurt your credit, but the truth is that it depends on the debt consolidation company and your willingness to do what you need to do to fix your credit rating.

The first thing you want to do is make sure the company you work with is above board and can honestly lower your interest rates. If you do that, you have a good start.

Debt consolidation can help your credit. If you take out a debt consolidation loan, the unpaid bills and late payments on your credit report will be settled. All you will have to think about is the one bill from the loan consolidation company.

If you choose debt consolidation without a loan, the bad credit posted won't be off until you have paid them, but you will be able to pay them faster, so still, in the long run, debt consolidation will help.

One downside to debt consolidation is that creditors may not be pleased if you have settled past debt for less money. It is still better than having bad reports on your credit report and MUCH better than a bankruptcy.

If you are careful to make your monthly payment on time every month and not accrue more debt, your credit will improve dramatically. However, if you pile on more debt because you have been too comfortable with your lower payment, you could end up back where you started from or worse off than before - with a defaulted loan and an inability to pay.

Debt consolidation only works to improve your credit if you are willing to make some changes in your spending habits. If you are committed to repairing your credit, debt consolidation will only help you - not hinder you.

Stay current with your payment; don't add on more debt; pay more than your minimum payment. Doing these things will make consolidation work for you instead of against you.