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How will consolidating my debt affect my credit rating?
Consolidating your debt will usually assist you repair a bad credit rating over time by virtue of the fact that it is easier to make good on lower repayments after you have obtain a consolidation loan, however it really depends on what situation you are in and what credit rating you have when you decide to consolidate. It also depends on what you do after the consolidation.
If you have a good credit score, you can go to your personal bank to request a loan to pay off all of your debts. Paying everything off is going to look very good on your credit report, and then you will be left with one large loan that more than likely will have a lower interest rate than what you were paying before. There may also be a lower payment overall than what you were paying when all of your debts were separate.
If so, making one smaller payment each month should be easy to make and easy to keep track of, which will be even better for your credit rating.
If you have bad credit and are unable to secure a loan to pay off your debts, you may choose the option of employing a debt consolidation company. They are used to dealing with people with bad credit.
While you will not be getting one loan that pays everything off at once, and then have that small monthly payment, the employees may be able to negotiate a much lower payment and interest rate that will be easier to make each month. While it does not immediately affect your credit score, it allows you to slowly build your rating back up if you make your payment on time each month.
It should be noted, however, that whatever situation you are in, once the consolidation has worked for you, it can be very easy to fall back into your old financial habits and ruin your credit all over again if you had bad credit before. Another scenario is that you could simply build back up a large amount of bills if you were in the good credit position. If you can avoid falling back into that financial pit, then no doubt your credit rating will be positively affected.
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