Improving Your Credit Rating By Consolidating
Posted on 25. Jan, 2009 by admin in Debt Consolidation
I have heard numerous myths that state that by consolidating debt, you hurt your credit rating. During this article, I hope to put this myth to rest. Firstly, there are two types of debt consolidation. There is a force consolidation from your bank or third party lender in which they clear all of your debts on your behalf and in turn owe them the funds. This can, in some cases put a black mark or flag on your credit rating with that particular lender / bank - but not on your overall credit report. For the most part anyway.
Debt consolidation in general actually helps your credit rating, especially if you’ve got lots of debt with lots of providers. It’s a good thing to have outstanding credit from 1 or 2 lenders. This works in your favour as it shows you can be trusted with credit. However, once you start getting debt with 4, 5 or more lenders then it starts to look suspicious. Especially if you start missing the odd payment here and there. In this situation, consolidating the debt from the 5 different lenders can actually help your credit rating. Not only will you have a smaller, more manageable monthly payment. You will also just have one, well serviceable debt source which can only do good things for your overall rating.
My advice to you is to consolidate on your own behalf before you’re in a position where your bank or third party lender forces you to do so. By doing this, you protect your overall credit rating and make your debt much more manageable. Not only that, if you consolidate all of your debts, you will be using your hard earned monthly income to actually pay off the debt itself as opposed to just high interest charges such as those charged by your credit card company.