• Ziweo Services
  • Ziweo Services

Debt Consolidation

Credit score can improve or decline

 

Your credit score partly depends on your credit utilization – the amount of debt you carry as compared to the total amount of debt available to you. If all of your credit cards are maxed out, opening a new one increases your available debt and causes your utilization ratio to go down, and that could help your score. But your score will take a ding any time you carry a high balance on any one card. So if you transfer multiple balances to a single card and get close to (or reach) your credit limit, your score will suffer even if your other cards are paid off.

 

If you consolidate by taking a personal loan to pay off your credit cards, your utilization ratio could go down, causing your score to go up. For this to work, you need to leave the credit card accounts open after you pay them off. But your credit rating could go down if an underwriter has cause for concern that you could easily rack up new debt on the open and now balance-free credit cards (many people do).

 

Debt consolidation rolls high-interest debts, such as credit card bills, into a single, lower-interest payment. It can reduce your total debt and reorganize it so you pay it off faster.

 

If you’re dealing with a manageable amount of debt and just want to reorganize multiple bills with different interest rates, payments and due dates, debt consolidation is a sound approach you can tackle on your own.