Bankrate Shares Expert Consolidation Advice
Bankrate shares some expert advice regarding debt consolidation and credit ratings via their professional debt advisor, Steve Bucci:
Wondering if debt consolidation will make a dent in your credit rating? In short, the answer is yes and here’s why:
By moving credit card balances into one installment loan to consolidate debt, a new inquiry is being created on your credit report and a large installment loan will now show up as well. Potential new lenders will then have to consider the credit score incorporated with the potential of you having to add to your credit card balances once again and since many people have to do so is why debt consolidation temporarily brings down one’s credit rating.
Keep in mind that there is a difference between a credit rating and a credit score. A credit score comes from those items that are reported one’s credit file to determine if a person is more or less likely to default on their next loan. A credit rating is assigned based on job stability, income and other similar factors to determine whether or not a person is creditworthy.
Focusing on financial health in general instead of merely a credit score or rating is key. It’s possible to have a decent credit score, for example, and still be thousands of dollars in debt. If you have a large amount of credit card debt, ask yourself how you got in that position and examine your financial habits. Look toward establishing a savings account with money set aside for the future. A good rating and score will be reflected if one is living in a financially responsible way.