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Does debt consolidation raise or lower your credit score?

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  • Does debt consolidation raise or lower your credit score?


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Answer #1 | 22/12 2013 19:11
It will not help in any way. And not only that, it's one of the worst ways to get out of debt. There's nothing smart about taking on more debt to get out of debt, that's fighting fire with fire. Debt consolidations feed on the tendencies that got you in trouble in the first place. By taking on another creditor (the debt consolidation loan), it's adding fuel to the fire and in this case, it's your money that's burning. Debt consolidation may seem appealing because there's a lower interest rate and lower payment, however, the only reason the lower payment exists is because your term is extended, not because of the rate actually being lower. If you stay in debt longer, you get the lower payment, by doing that you pay the lender more...which is why they're in business.Over 70% of the time with debt consolidations, the debt grows back because the person still doesn't have a game plan to either pay with cash or not buy at all. Plus they usually won't have any money saved up for emergencies and unexpected events which will ultimately become debt having to borrow to fix the problem. The companies don't tell you that with the reduced payments you'll be paying almost 5+ years which may not sound too bad, until you realize how much more you pay in additional payments. Bottom line: the longer you take to pay, the more they make...OFF OF YOU. The answer to getting rid of debt isn't a lower interest rate, it's changing your habits.
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