Does consolidating your credit cards hurt your credit

If you are struggling with making your monthly payments, there are better choices.

A consolidation loan will take at least 5-years to complete paying off.

Debt consolidation is one of the primary options available to indebted consumers who are looking to ease their path to zero balance as well as save money and protect their credit standing in the process.

Unlike other alternatives – such as debt management, debt settlement and even bankruptcy – debt consolidation, when done right, won’t damage your credit standing in any significant manner. You can check out our Debt Consolidation Overview if you don’t know exactly how it works, but the basic theory behind debt consolidation is that you can use a new loan or line of credit to pay off existing debt obligations in order to garner a lower overall interest rate and a more manageable monthly payment.

You may assume the credit standing implications of debt consolidation to be minimal since the process basically entails rearranging debt into a single balance, rather than paying it off, but it does have the potential to affect the way in which financial institutions and other decision makers view your credit worthiness.

The short-term impact can be either positive or negative, but either way the change will be minimal.

The end result is impossible to gauge ahead of time – as it depends on multiple factors, including the extent of your credit history, the accounts you have open, and the actions you take after consolidation.

In most cases, however, debt consolidation will lead to long-term credit score gains, since it will decrease your odds of default and put you on more stable financial ground.

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The act of consolidating your balances can affect your credit in the short-term given that it likely requires opening a new loan or credit card account – which impacts the New Credit portion of your credit score – and will alter your credit utilization ratios – part of the Amounts Owed section of your credit score.: Certain offers that appear on this site originate from paying advertisers, and this will be noted on an offer’s details page using the designation "Sponsored", where applicable.Advertising may impact how and where products appear on this site (including, for example, the order in which they appear).At Wallet Hub we try to present a wide array of offers, but our offers do not represent all financial services companies or products.This page explains debt consolidation loans in 2017.

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