If you’ve accumulated a lot of debt, chances are you’re already struggling with the stress to repay it. Each new bill may bring a wave of anxiety as you wonder how you’ll make ends meet. It’s even worse if you owe several different lenders money since you also need to keep track of several different debts.
For many people, the first step towards paying their loans back is consolidating them. But many people wonder, “do consolidation loans hurt your credit score?” The answer to that question can be complicated, and a lot of it depends on how you handle debt.
If you’re the kind of person who consistently repays loans, but just has trouble staying on top of them, a consolidation loan may be perfect. It will help you keep track of your debts, which will help you repay them and help your credit score. Yet, not everyone is like that and a consolidation loan may just be another kind of debt they neglect.
Keep reading below to learn more about how consolidation loans may affect your credit score!
Do Consolidation Loans Hurt Your Credit Score? Not Much
Just the act of taking out a consolidation loan may not affect your credit score too much. Especially if you have a low credit score, taking out another loan may not be significant. Most of the time, consolidation loans aren’t even tracked the same way as other loans — they’re often through third parties.
So if you’re asking “do consolidation loans hurt credit score data,” the answer is really up to you. If you don’t repay your consolidation loan, your lender may hurt your credit. But they could also be forgiving and give you the time you need to repay the loan.
Debt Consolidation Isn’t Used to Help Credit Scores
Most of the time, debt consolidation isn’t a strategy meant to help people’s credit scores. Instead, it’s a strategy that is meant to help people understand their own debt. It is supposed to help people understand where they owe money and to give them a realistic picture of how much debt they have.
It brings together student loans, credit card debt, mortgages, and many other kinds of loans into one convenient location. Then, most of the time, you just need to follow the steps to repay them which your lender will provide.
Consolidating Debt Usually Makes Repayment Easier
For some people, the reason they have so much debt is just because they have a hard time repaying it. They may lose track of which bills are due when, or which lenders they should pay off first. If they simply lose track of their bills, consolidation is a perfect solution.
And when repaying debt is easier, it’s more likely to actually get paid. The more you repay your debt, the higher your credit score will get. So, consolidating your loans can actually help your credit score instead of hurt it.
Consolidating Debt is the First Step Towards Getting Rid of It
If you’re still wondering, “do consolidation loans hurt your credit score,” the answer is a little complicated. A lot of it has to do with your own personal attitudes towards debt, and how likely you are to repay it. If you’re the kind of person who takes debt seriously, consolidation will probably help you.
And for other tips on repaying your loans, just keep reading here!