Does consolidating debt hurt your credit

6854933580_2c8b688306_z

Pros: The interest rate on home and auto loans may be lower than on credit cards, partially because they’re secured loans.

Also, the mortgage interest payments can typically be a tax write-off (up to a certain amount).

When you start a debt management program, you’re adjusting the payment schedule for your credit cards.

So it’s important to note that your creditors may report that you’ve missed a payment on your credit reports in the first month your plan starts.

After that, your payments are made on time according to the new schedule.

As a result, most people see their scores improve because they have low credit scores starting out.

Cons: You may need good credit to qualify for a low interest rate.

You’re also taking on secured debt in exchange for paying off your unsecured credit card debt.

Banks, credit unions and online lenders offer these options to consumers. In some cases, debt consolidation can help your credit score. It can also depend on which option you use for consolidation, since there’s more than one way to consolidate your debt. When you consolidate debt, you have a payment plan that you’re supposed to follow.For the most part, if you use the right option for debt consolidation for your circumstances, it shouldn’t hurt your credit score. If you follow that plan correctly, this means you’re making payments on time and taking steps to cut your debt load.Those are the two biggest factors in determining your credit score.So many times, your score goes up as your debt goes down.Pros: There’s no credit check to take money out of your retirement accounts.

You must have an account to comment. Please register or login here!