When you’re ready to get out of debt, sometimes it’s hard to know which path you should take.For some people, debt consolidation will be the best option because it can allow you to group all your debt together, thereby making it easier to manage your debt – and in some cases lowering your monthly payment and interest rate at the same time (see our article on how debt consolidation works).
The 3 major credit bureaus (Equifax, Experian, and Trans Union) compile this information and make it available, along with your credit score, to lenders who want to find out how creditworthy you are.
With that said, debt consolidation can affect your credit in the short-term in the following ways: What you do after you’ve consolidated your debts into a single loan or line of credit will have perhaps a greater impact on your credit standing than the act of consolidation itself.
After all, debt consolidation merely makes your debt easier to deal with; it doesn’t reduce what you owe or address the underlying issues that caused you to get into debt in the first place.
Theoretically, this can enable you to pay down what you owe faster and avoid missing payments.
However, the value of debt consolidation – both in terms of your credit standing and the bottom line – depends on the nature of your particular financial situation as well as what type of debt consolidation you pursue.