What effect will it have if I get a debt consolidation loan. I am not in any financial trouble but I am tired of just paying multiple collectors each month. Will this have any effect on my credit score or cause any problem in the future when I try to purchase a home. I have hear that it can cause problems like that and can make it difficult to get a home loan.....Does anyone have any personal experiences with doing this??
2007-02-08 03:42:41 · 6 answers · asked by Anonymous in Business & Finance ➔ Credit
A debt consolidation loan wouldnt affect your credit in a negative manner, but try not to close the lines of credit that you have now. So if you currently have like 3 credit cards you are paying on and you will include those balances in the consolidation, then keep like 2 of them open so that you still have credit (obviously you won't have the balances on them anymore though). Having little or no credit can be just as bad as having blemished credit.
I made the mistake of paying off balances and closing cards, which did affect my score negatively. You should always have credit available, but you also want to make sure you don't have a card with a $15,000 limit and no balance because that makes you a risk as well with all that credit available. You should then call the credit card company and have them lower your limit...I know it sounds stupid, but it will effect your score.
Ultimately, paying off debt will do wonders for your score and your idea of consolidating will not only allow you to pay down your debt faster, but it will definitely help when purchasing a home....as long as you are on time paying the consolidation.
Beware of those programs that are more credit counseling though, cause those could effect your situation if you are not having trouble now. There is a difference between an actual debt consolidation loan and the credit counselor thing where they call and work down your interest and you pay them one lump sum each month and they distribute the payments. If you are talking about this type, then I say continue on the path you are on.
2007-02-08 03:48:42 · answer #1 · answered by Huh? 3 · 1⤊ 0⤋
A consolidation loan should improve your credit score as long as you don't run your credit cards back up. Use the loan to pay off high-interest credit cards, and keep making your payments regularly.
If you have a credit card with a high limit, ask them to bring it down. If you apply for a home loan, and have several credit cards with a total limit of 10 - 20 thousand dollars, the mortgage company will worry that you may run up $20,000 of unsecured debt quickly.
Also, don't apply for cards to get free stuff or to keep going to one with a lower interest rate. Every time someone checks your credit, it counts against your credit score because they don't know whether or not you're going to borrow money from those sources or not.
Basically, pay your bills on time, and don't run up your credit card balances, and you'll be able to get a good home loan.
Good luck!
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2007-02-08 03:49:53 · answer #2 · answered by FozzieBear 7 · 1⤊ 0⤋
If you are not currently having problems making your payments and such, your best bet is to continue what you are doing. I turned to debt consolidation when it got rough for me (i.e. falling behind on payments, barely able to make the minimum on others, etc.) and it actually improved my credit rating and now the light is very bright and clear at the end of that debt tunnel.
2007-02-08 03:50:54 · answer #3 · answered by Sunidaze 7 · 0⤊ 0⤋
If you get a true debt consolidation loan it should not have any negative impact.
2007-02-08 03:49:00 · answer #4 · answered by ? 7 · 1⤊ 0⤋
Payday loans in many circumstances have an extremely intense interest fee, and is merely functional in case you elect it desperately for an extremely short volume of time, and are useful which you would be able to pay the interest fee on the non-public loan
2016-11-02 21:35:57 · answer #5 · answered by Anonymous · 0⤊ 0⤋
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2007-02-08 04:10:28 · answer #6 · answered by Anonymous · 0⤊ 0⤋