How Does Credit Card Debt Consolidation Affect Your Credit Report?

Posted by admin on October 18th, 2009 filed in Finance

By the time you have entered into a credit card debt consolidation program, your credit score has probably already suffered some ill effects. Late payments to creditors are recorded and will lower your overall credit score. Continued late payments will accelerate the loss of points, until ultimately your credit report shows nothing but late and missed payments.

When the monthly payments for your credit cards bills become too much to handle, a good option is to get a debt consolidation loan. This will immediately remove the balances that are owed, stopping late fees, harassing phone calls, and threats to send collection agencies after you.

But is it that easy? Will the credit card companies actually let you pay off your balances all at once without hurting your credit score?

The answer is yes and no. Yes, you will be able to pay off the balances completely with a consolidation loan. This will show up on your credit report since the reduction of debt on your credit report will increase the amount of available credit. You will be done dealing with your credit card companies after this is done.

The tricky part comes from how the new loan is manifested in your credit report. There is a possibility that for a short time, your credit report may show that you have no available free credit because of your past debts, and that at the same time you took out a new loan, which further decreases your available credit into negative territory.

If poorly timed or performed in a certain way, this could hurt your credit score because it will appear that you have taken on more debt than you have credit available (even though you have not). Sadly, there really is no solution to this problem. It is simply a fact of moving your debt from one source to another.

However, in reality, it is a very small loss when you consider what a future after bankruptcy looks like. This is only one outcome, though. The core debt consolidation process will not hurt your credit score at all, it is only technical glitches that threaten any change.

Final Tip: By researching and comparing the best credit card debt settlement services in the market, you will be able to determine the one that meets your specific financial situation. Nonetheless, it is advisable going with a trusted and reputable debt counselor before making any decision, this way you will save time through specialized advise coming from a seasoned credit card debt advisor and money by getting better results in a shorter span of time.

Hector Milla runs the Credit Card Debt Free website - where you can see his best rated credit card debt settlement and debt consolidation service.

Visit for further information and read our full reviews of the best debt settlement companies in the market today, plus articles and video training about how to get the most of your credit card debt settlement process.