When you’re ready to get out of debt, sometimes it’s hard to know which path you should take.
For some people, debt consolidation will be the best option because it can allow you to group all your debt together, thereby making it easier to manage your debt – and in some cases lowering your monthly payment and interest rate at the same time (see our article on how debt consolidation works).
But of course, before you can decide if it’s the right choice you have to answer some important questions.
One of the most important is, “does debt consolidation hurt your credit score?
This is why it’s important to know yourself and be realistic about your future behavior.
If you know for sure that you won’t be tempted by leaving those old accounts open, then you can feel comfortable doing debt consolidation and knowing it will not hurt your credit, aside from the relatively minor impact of the hard inquiry.
Here are the questions you must answer in order to figure out if debt consolidation will hurt or help your credit in the long run: There are three main ways of doing debt consolidation: Each of these three methods requires a hard inquiry on your credit, which is the same as when you apply for a new credit card, submit a rental application, or get an auto loan.” To answer that, you need to understand how credit reports and credit scores work.If you’re not familiar with the process, here’s a very brief explanation: Your credit report contains information about all the credit accounts you’ve ever had, including mortgages, auto loans, credit cards, student loans, etc.” but also in giving you tools to decide what the best course of action is in your particular situation.Remember, when considering whether to do debt consolidation, compare how these factors would be affected by the loan: If you have any questions about the information above and how it might relate to your own individual situation, please post a comment below and we’ll do our best to answer it.