Does Consolidating Credit Hurt Your Credit Score?             Click here to Print

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#jayben - Says,

i have quite a bit of debt from an unsecured personal loanand student loans i took out and was wondering that if i consolidated them if that would hurt my credit score?
#Justin - Says,

Hi Jayben,

Debt consolidation is good idea, if you wish to lower to interest rate and get the extra fees and charges waived off. However, I don't think you can consolidate the loans if your student loan is federally granted. If it is a private loan, you can do it. Yes, debt consolidation hurts your credit score, since it indicates that you are unable to pay off your bill normally. This gets reported on your credit report and the potential creditors or lenders start viewing such people as 'risky' borrowers. As far as the score is concerned, it will take a hit, but exactly by how many points, it is impossible to say.

#SIA - Says,

If you file for Chapter 13 bankruptcy, it will ruin your credit. The notation will stay on your credit report for 7 years and on your public records for 20
#jayben - Says,

justin and SIA...thanks for your comments. they've really helped. i guess i'll have to continue to get some advice to see what the best route will be for me.

but thanks again

#lisaroberts2384 - Says,

Hi Jayben.
Your credit card score will not get affected by using a debt consolidation program. Credit bureaus will make a notation on your credit report but this will not affect the credit score. The problem, however, lies in how your future creditors may view such a notation. Some may take it as a positive thing showing that you are taking responsibility for your financial situation. Some view it negatively. This notation is removed once you finish or terminate the debt consolidation program. Debt consolidation is a good idea especially since a good agency may be able to get your interest rates reduced, waive or reduce late fees, financial charges, etc. This results in you paying less money to your creditors in the long run,and, in a quicker amount of time. But make sure you choose a reputable Debt Consolidation agency – a non-profit agency which has third-party accreditation and has a proven track record. Check for a rating with the BBB. The best rating is A+. You should deal only with certified professional credit counselors.

#cinnamngrl - Says,

it depends on the kind of debt consolidation. Do you mean through credit counseling? this will affect your score but it is better than defaulting.
#Aaron - Says,

Hello jayben,

I am afraid that debt consolidation does hit credit score. This is because by the time you start settling your dues, you may have had a no. of late payments recorded on your credit report.

However there are ways to boost the score. Firstly check the status of your accounts on your credit report. Once you settle the dues after consolidation, your report should reflect "Satisfied" or "Settled" instead of unpaid. Secondly negotiate your account status with the creditors and go for a pay for delete agreement with them. Then ask them to update your account status as "Paid in full" or "Paid as agreed". Thirdly keep some credit accounts open. And yes last but not the least get a secured credit card.

And one more thing is that you won’t be able to consolidate the student loan.

Regards,

Aaron

#cinnamngrl - Says,

one issue with this kind of credit counseling is that your first payments go toward dues rather than your bills. Leaving your bills unpaid this way can cause serious if temporary problems. You should consider whether you can negotiate settlements on your own and save the fees.

Also, while student loans cannot be settled in this way, there are many ways of deferring payments. There is also a program where if you work in public service for 10 years, the loans can be forgiven.

#Sharon - Says,

Hi jayben,

Attempting a debt consolidation means to get together all your loans to pay off the greater debt. In general it may not affect your credit score in any major way. But the credit score also depends on how you deal with your current financial situation.

After you go for the debt consolidation program make sure that you use your older accounts. Also check the status of your accounts on your credit report. Once you settle the dues after consolidation, your report should reflect "Satisfied" or "Settled" instead of unpaid. Then negotiate your account status with the creditors and go for a pay for delete agreement with them. Then ask them to update your account status as "Paid in full" or "Paid as agreed". Also make sure that you get a secured credit card.

And one more thing is that you won’t be able to consolidate the student loan.

Regards,

Sharon

#equistar - Says,

Debt consolidation will not hurt your credit score and is also a good idea to think for then just going for chapter 7 or 13 bankruptcy. I personally suggest you to go for it. But Debt consolidation is also a loan to pay off others so try getting out of it fast.
#miller29 - Says,

I want to increase my credit score within a year so that I can possibly get approved for a car. Will paying the negative accounts on my credit help my score, and if so how much will they help!
#Aaron - Says,

Hi miller,

There are various ways in which you can try to improve your score. However, it would have been much better if you could have given details of your present credit condition.

You will have to go on making on-time payments on your credit accounts and remove ant wrong items from your credit report. You can remove the wrong items from your credit report by sending dispute letter to the credit bureaus.

If you had went delinquent on any of your accounts, or if you have collections on your credit report you can try removing these through "Pay for delete" or Goodwill letter and disputes. All these together can help you to improve your credit score.

Thanks,

Aaron

#Guest - Says,

It will not hurt your credit score
#Aaron - Says,

Hi Guest,

Yes, debt consolidation does not hurt your credit score as you are not required to miss payments. However, if you enroll in a debt consolidation program, it gets listed on your credit report and gets removed once you finish paying off your debts through the program.

Thanks,

Aaron

#cccfree - Says,

Credit counseling will not hurt your credit but what it will show on your credit report that you're in a debt management plan and that may reflect poorly on your credit if you're trying to apply for more credit because it will seem like you're trying to get help in regards to your debt.
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