Does consolidating accounts hurt fico score

17 Sep

There are ways to manage your debt without harming your credit score.

It all depends on how well you're handling your debt, and how you chose to bring your debt repayments into one affordable monthly payment.

Before you consolidate, it's worth talking through your options with a credit counseling agency.

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While it bases every credit score against five risk-assessment categories, it factors these categories differently for each consumer group.If you enroll in a debt management plan, you'll make regular payments to a credit counseling agency, which will then share this money among your creditors.Some of those creditors may inform the credit bureaus that your account is being repaid in this way. S., disregards debt management plans when it compiles your score from your credit report.Choose the option that optimizes your financing needs at the right time.There are times when a debt consolidation loan helps credit scores.Chapter 13 bankruptcy, in which you pay back some of the debt over a three- to five-year period, has a slightly gentler effect.This falls off your report after seven years from the date of filing, whereas Chapter 7, which involves asset liquidation, sticks for up to 10 years.Debt consolidation loans can be bad for credit if your revolving balances quickly return because of undisciplined spending.Settlement programs and debt management plans can also hurt qualifications – but could result in longer-lasting relief.However, these instances are rare, occur after a time delay, and depend on the spending choices you make afterward. This includes people dealing with garnishment or late payments.Those that are eligible must pay off credit cards and keep the balances low over time.