Does debt consolidation affect your credit score?
Answer:
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.
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written by rickrexor , July 30, 2010

After college, I was in a sea of debt that left me feeling exhausted and hopeless. At the bar a few nights ago, some of my college buddies and I got together and we were all currently discussing our first jobs out of college. Like myself, my friend John had put himself entirely through school, and were talking about different strategies to we could live independently, but also pay off our bills. John told me about Consolidation Credit Counseling from DebtGuru. Not only can they help you lower your interest rate, but can help you get on the track to paying off your debt early. http://www.debtguru.com

written by Jehnavi , January 27, 2011

I had the same thing happen. Not only did the company raise my rate to 27.99%, but they cut my available credit to the balance I owed. I pride myself on paying my bills on time & using my credit card only for emergency situations, but now I find myself with a lower credit score b/c of it. All I was trying to do is use my credit card wisely. This is all so frustrating.
http://www.financemetrics.com/know-the-secrets-of-improving-credit-scores/


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