How Debt Consolidation May Improve Your Credit

Debt consolidation may be an option for you to improve your credit. Here's how to make the most out of consolidating your debt to improve your financial situation.

 

Getting your debt under control is essential to meeting your financial goals. Debt consolidation is one way to help you get your debt under control.

Debt consolidation means taking out one loan to pay off other debts, like credit cards, medical bills, department store charge accounts, and taxes, to name a few. When you consolidate your debt, you have only one payment due each month, instead of two, three, or more. Debt consolidation may also help lower your interest on your debt, as well as the total amount you pay on your debt. If you consolidate your debts with a home equity loan, you may be able to deduct the interest from your taxes.

Consolidating your debt also may be able to help you improve your credit score, as well as your overall financial situation. Having just one bill with one monthly payment, along with a fixed interest rate, may help you streamline your finances, free up extra money each month to help you meet your financial goals, and plan for your financial future.

Things to Remember

Keep in mind that:

· It may take a year or two after you consolidate your debts before your credit score changes. If you make your monthly payments on your debt consolidation loan on time, every time, and if you use your credit cards and other credit responsibly, your credit score may improve over time.

· Some options, like home equity loans, may involve additional fees. Also, look at the total cost of debt consolidation options, not just monthly payments or interest rates. For example, to get a lower monthly payment, you may need a longer term, which may cost you more in interest. Also, a loan with a low interest rate may mean a higher monthly payment.

· Closing all of your credit card or other credit accounts may lower your credit score. If you plan to close credit card accounts, close your newest accounts. Keep your oldest credit card account open to help you maintain a long credit history, which may improve your credit score.

· It's important to get off to a good financial start after consolidating your debts. Make a budget and stick to it, start saving money for emergencies, and limit your use of credit cards and other credit.

Protect Yourself

Make sure you get everything in writing, read everything carefully before you sign it, ask legal and financial experts to help you understand anything that isn't clear, and watch out for anything that seems too good to be true or too easy to do.

Learn More

To find out more about whether debt consolidation might be an option for you, visit our Debt Consolidation page.

 

 

These are general recommendations not applicable to all financial situations. Every financial situation is unique. Further, the suggestions and recommendations contained within the content provided are not an assurance of any future result. Be sure to discuss your specific financial circumstances with a legal or financial expert before you take action. Contact us for more information.