Can Debt Consolidation Affect Credit Rating? January 22nd, 2011
Can Debt Consolidation Affect Credit Rating?
Are you considering a debt consolidation loan or a debt consolidation program? Do you wonder if using debt consolidation options will have an effect on your credit in a negative way? Here is 3 reasons why debt consolidation affects credit ratings in a positive way.
If you have a lot of credit card debt, then it is affecting your credit rating in a negative way. One thing that credit card companies don’t tell you is that if you carry a balance on your cards and it is over 25% of your credit limit, then you are actually penalized on your credit rating, even if you pay your payments on time. So if you consolidate debts that include credit cards with high balances, then you are doing yourself a favor and helping your credit.
You can improve your rating on your credit report that are more than just credit cards, like personal loans and car loans. Banks love it when they see paid off loans on your report. This can boost your credit rating a lot.
If you have enough debt that you are considering consolidating it, then it is obvious that you need to. The key is that if you consolidate your debt and payoff credit cards, then you need to stop using the credit cards and get rid of them. If you consolidate your debts and then you run your credit cards back up to their limits you are doing nothing to help yourself. You will end up in a worse situation, then you were in to begin with.