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The content is broad in scope and does not consider your personal financial situation.
Bankrate recommends that you seek the advice of advisers who are fully aware of your individual circumstances before making any final decisions or implementing any financial strategy.
A credit rating is assigned by a person who looks at issues beyond your credit report before deciding how creditworthy you are.
These issues include income, job stability, your ability to use dormant credit lines and more.
Debt consolidation is a means of debt refinancing that involves taking out a new loan to pay off other loans and credit card debt.
The real questions to be answered are: Why do you have such a large amount of credit card debt?
Have you started an emergency savings account of 6 to 12 months’ worth of living expenses, so you won’t have to use credit for unexpected expenses?
Moving the balances of your credit card accounts into an installment loan for purposes of consolidation may cause a slight drop in your credit score.
And the fact that many people do just that is why the action will temporarily cut your rating.
For the record, and for those who don’t know the difference, a credit rating and a credit score are 2 different things.
Here’s a closer look: If you’re struggling with debt, you may have already been approached by companies that promise they will help you wipe out your debt. Such companies may charge you hefty fees for consolidating your debt, and it’s possible to wind up even further in debt if you don’t fully understand the company’s fees and conditions.
Credit counseling through a reputable non-profit agency is almost always a better alternative.Should you need to cut back on expenses in other areas to afford the consolidation loan payment, be sure you’re willing to make the needed sacrifices for the entire 5-year repayment period, and be doubly sure you don’t use those cards unless you can pay them off in full each month!