Debt Consolidation and Your Credit Score

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Christian Credit Counselors

Your Financial Choices

Every financial choice is going to affect your credit report.  The best thing to do is to make your monthly payments on time in full.  Unfortunately, this can’t always happen.  If your debt is out of control, you have the option to choose debt consolidation.  Is this the best decision for your credit report?

Consolidating Your Debt Loan

The goal of debt consolidation is to make it easier to pay off debt.  In turn, this will raise your credit score and improve your credit report – assuming you make the monthly payments without defaulting.  Debt consolidation also makes room for a new line of credit – assuming the debt is paid first.  Making the switch from two or three to one large sum is another story.  Is that the right move for your credit report?  The answer is yes.  Your credit report will show that the previous active accounts are closed and cured through consolidation.  The consolidation is a new account where you can start fresh.  However, some moves will hurt your credit score.

In what form will the consolidation be?  Choose between a debt loan, debt management plan, home equity loan and a single credit card.  Preventing a drop in your credit scores depends on the strategies used when you choose a form of consolidation.  All of them have the ability to drop your credit score, but all of them can boost your credit score too.  You need an experienced company such as Christian Credit Counseling to assist you with choosing the best route for your finances.

Lowering Your Monthly Payments

How will it be easier to make monthly payments?  You have the choice of lowering your interest rate or increasing the amount of time it takes to pay it.  Extending monthly payments increases interest rate payments.  Lowering interest rates makes it easier to pay a little extra over the minimum balance.  It doesn’t matter which one is chosen, as soon as this is paid off completely you can add a new credit account.

Do you want to know more about debt and how you can make smart financial decisions now that will help you secure a more prosperous financial future? Sign up for our newsletter for monthly money tips.

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