Consolidating and paying down debt can have a huge impact on your credit scores. According to FICO, the company behind most of the credit scores used by lenders, most consumers with high credit scores (785 and above on a scale of 300 – 850), tend to keep their balances at a minimum. Specifically, two-thirds carry less than $8,500 in non-mortgage debt, and they use an average of 7% of their available credit on their credit cards.
That means that paying off debt, whether you use a consolidation loan or just put every penny you can toward your debt, can often be helpful to consumer’s credit ratings in the long run. The biggest risk, though, is that it’s easy to run up new balances on the cards that have been paid off in the consolidation. And that’s definitely not a good move for your credit or your bottom line.
Remember, moving around debt is not the goal here. The goal is to pay off those balances to free up cash flow as well as to help build strong credit. A consolidation loan, used right, can help you get there just a little faster.
Ask the professional staff at credithelpfinancial.com to help you figure if this type of loan is right for you.