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Home / Credit / Does Consolidation Ruin Your Credit?


Debt consolidation does not ruin your credit. It many instances, it will improve a person’s credit. Any hits to your credit will come if you were behind on the payments for the debts that you are consolidating.

Credit Dings

As stated above, any dings to your credit will come from having late payments on the debts before you are able to consolidate. According to FICO, thirty-five percent of your credit score is based on your payment history. That is great if you make all of your payments on time. The downside is that a single late payment can lower your score between 10 and 100 points. The amount your score will drop depends on high your score was to prior to the late payment. A person with poor or fair credit will lose very few points, but a person who has excellent credit may lose 100 points after a single late payment.

That initial hit to your score happens the day the payment is marked late. The hit becomes more intense if the payment is 30 days or more late. Accounts that are 30 days or more behind are considered to be delinquent. Delinquent accounts are subject to collection and an additional credit score dip.

The news gets even worse. Once an account is posted as late or delinquent, your credit score will stay lower for up to seven years. If your payment is simply late, your score will recover within six months. If your account becomes delinquent, it may take at least a year for your score to recover. If collection action becomes necessary, it may be seven years before your score recovers. All of this information applies to a single late payment. If you have several late payments, your score may never fully recover.

Top Debt Consolidation Tip

Debt consolidation will lump all of your balances into a single loan, so just one payment. Often, this payment is lower than all of the payments you had, freeing up cash and ensuring that you are able to make your payment on time. While debt consolidation can help you at any time, it is best to consolidate before you have any late payments. This prevents any credit dings and makes getting a debt consolidation loan much easier.


About the author: Jerry Coffey


Jerry Coffey spent many years in a debt-riddled gray area somewhere between broke and desperately broke. His seemingly endless need for more and more cash led him to payday loans, repossessions, bankruptcy, and depression. After years of the same financial style, he heard a piece of advice that inspired him to find a way to change. The advice: ''The very definition of a fool is someone who continues to do the same things, but expects different results.'' This led him to a much more frugal lifestyle that sees all of his bills paid on time and a growing savings account. Even the seed of a retirement account has begun to sprout.


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