How Does a Debt Consolidation Affect Credit Rating?
What Debt Consolidation Is Debt consolidation normally come in two flavors: a debt consolidation loan and a debt management firm. Both of these solutions will lump a consumer’s debt into one neatly wrapped, and often lower, monthly payment. However, deciding between the two can have an impact on your credit report and credit rating—both in the short and long terms. So before choosing a debt consolidation method it’s best to know what you are getting into. Debt Consolidation Loan Debt consolidation loans can either be in the form of a home equity loan (in which you borrow against your home’s value) or a personal debt consolidation loan, with no collateral. Initially, borrowing this money will bring your credit score down by a few points, as it will heighten your debt-to-income ratio. However, as balances begin to be transferred from creditors into your debt consolidation loan, your credit score will improve. And as you make timely payments toward your debt consolidation loan your cred
