Dealing with your credit score can be a very slippery slope, especially if you have debt problems going on right now. Everyone wants to get out of debt, but no one is willing to sacrifice their credit in order to make that happen. With that in mind, how are you supposed to handle your debt situation? For people with big debt problems and not much hope in sight, it is imperative that you choose a debt relief program that gives you a fighting chance to succeed both in the short term and over the long haul. Consolidation loans have an impact on your credit rating, but just what is that impact? How will it impact your short term strategy?
First and foremost, know that debt consolidation loans have lots of positives when it comes to your short term credit situation. When a credit score is determined, one of the things that goes into that determination is the number of revolving accounts you have open. This means if you have six or seven credit cards that are open, you are taking a hit with your score. A debt consolidation loan will instantly pay these things off, so that will leave you with only one loan, instead of the seven. This will instantly bring down your credit score some, so that’s a positive to begin with.
Likewise, something that impacts your credit score is the percentage of credit used to credit offered. Maxed out credit cards can be a weight on your score, so the best thing to do is make sure they are knocked out first. Obviously a consolidator will do this, so that’s another plus for your score. Additionally, you can look towards the fewer missed payments, late payments, and over the limit penalties that typically go along with being in debt. With a consolidation program, these things are going to stop and you will see your credit score rise as a result.
The most important factor in determining your credit score is just how much debt you have at the current time. If you are seriously going to help out the score, this is the root problem that needs to be taken care of. For most people, consolidation will be one of the best, if not the best option for improving this. With your amount of extended credit being knocked out quickly, you can improve your score and give yourself a chance to succeed financially over the long run. In that way, consolidation is both a short term and long term idea.