Thinking to take up credit card consolidation with a debt agency may leave you worrying about the impact it can bring to your credit score. Undoubtedly this credit score is important as it’s a direct ticket to low interest long term loans that you might want to take in future. However handling temporary credit card debts which have accumulated in numbers and demand much of your brain in keeping a track of their repayments is cumbersome. Resultantly people are looking for smarter ways out to pay off as a total amount and probably make a discounted repayment- one which is lesser than all individual debt repayments summed up.
Credit card consolidation
The basic concept of credit card consolidation is turning all your unsecured credit card debts into a single debt by taking a loan to pay off the existing debts. This concept has been devised keeping in mind various points:
• Better management of debt repayment
• Benefitting by negotiating a common lower interest rate
• More organized monthly budget
• Making handling of multiple accounts hassle-free
This loan to pay off all other debts is chosen keeping in view the least interest option. It is a smarter way to take a lower interest loan to pay off all high interest or high penalty debts or bills.
How credit scores are influenced positively by credit card consolidation
Credit card consolidation impacts credit scores in multiple ways often not obvious at first though. Basically there are positive impacts of credit card consolidation with a debt agency on credit scores. This is because you have repaid all your debts on paper and stand only with a single debt. This timely repayment of numerous debts makes you a promising borrower. Further paying a single loan off in installments regularly adds stars to your borrowing history.
How credit scores are negatively affected by credit card consolidation
Credit agencies keep a record of what you were entitled to pay and what you actually pay. Paying off debts lesser than the actual repayment amounts as a fruit of negotiation by the debt agency is taken to be as ‘debt settlement’- principally signaling your inability to pay the entire amount which was promised. Secondly, transferring all credit card debts to the lowest interest card and discontinuing with those accounts or credit cards leaves you with a single loan or debt which impacts the ratio of the amount of credit you possess and use which brings down your credit score.
Is credit card consolidation favorable
What can be deduced for credit card consolidation with a debt agency? As far as impacting credit ratings is concerned, this step by you definitely influences the credit scores. How you consolidate your credit card debts determines in which direction your credit score moves. If you want to pay less by negotiating you have probably decided to ruin your credit numbers. But if the use is to pay off several debts at once and replace them all by a higher debt which costs less, will pay better in the long-term. So using credit card consolidation in a smarter way nourishes your credit scores and financial status as well!