Does consolidating debt affect credit score
But of course, before you can decide if it’s the right choice you have to answer some important questions.
One of the most important is, “does debt consolidation hurt your credit score?
You can transfer your balances to a new account—typically through a lower-interest credit card with a high credit limit.
Keep in mind, though, that there are normally transfer fees involved in moving balances from one form of debt to another.
While consolidating those debts into a single payment with a lower interest rate can help you pay off debt faster, you should be wary of companies offering debt consolidation plans.
If handled correctly, debt consolidation can bring financial freedom by relieving the weight of overwhelming debt, but debt consolidation can also affect your credit score.
Debt consolidation programs usually consist of a loan to pay off the sum of your other debts.
Not only does this make budgeting and paying your monthly debts easier, but it also allows you to pay off your debt faster with more of your payments going toward the actual debt rather than the interest.
People with good credit can normally go the DIY route when it comes to consolidating their debt.
If you feel as though you're drowning in credit card debt and can't keep up, consolidating your debt could be key in getting your finances back on track.