Are you considering a debt consolidation loan or a debt consolidation program? Have you ever wondered if debt consolidation affects your credit rating? Here is 3 reasons why debt consolidation affects credit ratings in a positive way.
Your massive credit card debts have a very negative effect on your credit rating and score. You probably do not know this, but once you exceed a balance of over 25% of your credit limit on any credit card it starts to negatively affect your credit score, even if you pay your payments on time. So if you consolidate debts that include credit cards with high balances, then you are doing yourself a favor and helping your credit.
You can consolidate not only credit cards, but if you have a car or a personal loan, then when you consolidate those and pay them off you will improve your credit rating. The credit companies love to see that you paid off a car or a personal loan. This can boost your credit rating a lot.
If your debts are out of control enough that you have considered debt consolidation of any sort, then you probably need it. The trick is that you need to not only consolidate your debts, but also cut up the credit cards so you do not get yourself in trouble again. Some people will consolidate their debts, then run their cards right back up to where they were and that is a bad idea. You will end up in a worse situation, then you were in to begin with.