Consolidating credit card debt impact credit score
Theoretically, this can enable you to pay down what you owe faster and avoid missing payments.
However, the value of debt consolidation – both in terms of your credit standing and the bottom line – depends on the nature of your particular financial situation as well as what type of debt consolidation you pursue.
With that said, debt consolidation can affect your credit in the short-term in the following ways: What you do after you’ve consolidated your debts into a single loan or line of credit will have perhaps a greater impact on your credit standing than the act of consolidation itself.
After all, debt consolidation merely makes your debt easier to deal with; it doesn’t reduce what you owe or address the underlying issues that caused you to get into debt in the first place.
However, your credit report and possibly your credit score react to each of these debt relief options, which you should certainly take into consideration when determining the right course of action.
You actually lose control over most – if not all – of your credit accounts when you enroll in a debt management plan.
“Money is the last taboo subject,” said So Fi Chief Operating Officer Joanne Bradford in a May episode of the Digiday podcast. They’re uncomfortable with talking about how much they make, how much they save, what they can do with it.” According to the American Psychological Association’s latest “Stress In America” report, money is the number one cause of stress—ahead of work, family, and health concerns.
So unless you’re expecting a windfall from a long-lost relative (who probably didn’t talk about money either), it’s up to you to come up with a game plan to manage your finances.
You can enroll in a professional debt management plan, or consider rolling several of your debts into a new consolidation loan.Another type of debt consolidation is one you would get through your mortgage lender – a HELOC or home equity line of credit.This essentially allows you to borrow money to pay off your debts using your home as collateral.In turn you would pay off the lump sum likely at a much lower rate than say what your credit card company is offering.In turn, however, your home could be on the line if you default.