Does getting a debt consolidation loan for credit card debt result in a bad credit rating being placed on my record?
When credit card debt becomes too much, the obvious solution is to consolidate that debt into one payment each month. This takes a lot of pressure off of your wallet and it also takes a lot of pressure off of you.
There are several options available to you when it comes to debt consolidation. You can choose non-binding agreements with creditors, such as the informal arrangement that not all creditors will go for, or you can choose to do something such as getting the debt consolidation loan and paying off all of your credit card debt.
As for what a debt consolidation loan of credit card debt will do to your credit rating, it will not hurt you. The reason why it will not hurt you is because you are paying off your debt with the money you receive from the loan. You can leave the accounts open, which shows you have available credit that you are not using. This can improve your image on paper when creditors look at your credit report. It shows that you are not so desperate for cash that you are using all of your credit.
After you have paid off your credit card debt, you now have one single payment that takes care of everything.
If you really want to give your credit rating a boost, you can charge small amounts to your accounts each month and pay them off before or when the bill is due. This keeps on time payments being reported to your credit file, which will boost your credit rating.
As for those with bad credit, there are other options that are available if a debt consolidation loan cannot be secured. The first option is to go to a debt management agency to see what options are available. These agencies consolidate debt in a number of different ways. There are agreements that can be met with the creditors that can be legally binding or non-binding. There are, however, certain requirements that must be met. An example is that your debt should equal at least $10,000. Anything less than that does not qualify. You may also have a maximum amount of debt that can be dealt with depending on the method of debt consolidation you use.
When you use a method other than a debt consolidation loan, your credit rating may seem stagnant or it may even drop slightly while in the debt management program. However, your credit rating will rise as your debts are paid off, but keep in mind that any defaulted payments will remain on your report for 5 years. This does have a negative impact on your credit rating.
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