subject: Does Debt Consolidation Ruin Your Credit? Tricks And Traps [print this page] Does Debt Consolidation Ruin Your Credit? Tricks And Traps
With so many Americans owing countless thousands on their credit card balances, a large number of them are interested in debt consolidation programs to get out of debt faster.
There are, however, some misconceptions about consolidating your debt. Many people believe that doing so may completely ruin your credit for years so come. However, this is actually far from being the case.
Aurora Lillo Editor of the "Best Debt Consolidation Companies" website -- http://www.BestDebtConsolidationCompanies.net -- pointed out;
"...The way debt consolidation works is by taking all your existing balances on high interest accounts and transferring them over to a low interest installment loan. This allows consumers to save a substantial amount on finance charges, as consolidation loans have interest rates which are significantly lower than those of most major credit cards and retail store cards. This, in turn allows the consumer to pay off their balance a lot faster, as they are paying less interest charges..."
Getting an installment loan and transferring your balances over to it does not hurt your credit score in itself. It may actually improve your score, as your other accounts will show that you have no balances on them. This will especially improve your overall score if the balances on your cards were close to the limit. Being too close to your card's limit will lower your score.
There are a few things you should definitely avoid if you want to maintain a good rating at the bureaus. Once you get a debt consolidation loan, your balances will be transferred from your other accounts over to it. This can make it quite tempting to start using them again and simply falling back into the same trap that you were in before. If you use your cards, make sure that you will be able to pay off your full balance before the next statement in order to avoid any finance charges and most of all, to keep from accumulating a balance again.
While you may think it's a good idea to close some of your accounts in order to lessen the temptation of using them again, this is not such a good idea. Especially if you close the oldest account that is on your debtor's report. The longer an account remains open and in good standing, the more it will contribute to increasing your overall credit score. Closing it can do just the opposite.
"...Another thing to consider is to avoid opening up new accounts that you don't need. Every time a creditor makes an inquiry on your file, it reduces your overall score by a few points. Furthermore, getting new cards can simply make it tempting to use them and run up a balance again..." added A. Lillo.
Further information about trusted and reputable companies for debt consolidation by visiting; http://www.BestDebtConsolidationCompanies.net
