What is effects of consolidation of debts on credit rating?

Question

Is it advisable to consolidate when you have too many debts?

Answer 1

I'm no expert, but my guess is that it would probably lower your rating in the short run.  But if you paid the consolidation loan down, or paid it off, it would boost your rating quite a bit.

Here's another alternative:  pay the minimum payment on all of your of your loans, and make sure that they are all current.  On the loan that has the lowest balance due, make extra payments.  Pay 5 or 10 times the normal payment if you can afford it.  Get an extra job if you need to.  Cut expenses wherever you can.  Brownbag your lunch;  walk 10 blocks instead of taking a taxi.  Ride a bike to work.  Carpool.  Skip the mocha caramel latte with sprinkles, and bring coffee from home for the commute.  And put all the savings towards that one loan.

When it's paid off, put all of that money towards the next lowest balance, along with the minimum payment you were paying before.  When it's paid off, keep doing this with the loan with the lowest balance, until they are all gone.  good luck!

Answer 2

Yes its advisable because you can consolidate all your debts in to one single payment monthly. Your debt counselors are the specialist of that field and more often they have relationship with major creditor so they can also help you negotiate to reduce your debts. They also provide you with an affordable debt repayment plan with analyzing your financial situation.

But will it affect your credit depends upon the type of program you choose to consolidate. For ex: If you choose debt consolidation loan then it can improve your score as it is considered as new loan.