Does Using Debt Consolidation Affect a Credit Score Negatively?

Debt consolidation provides a means of negotiating with your creditors potentially cutting your outstanding debts in half. If you don't pay all your accounts, your credit continues to suffer and the interest rates soar out of control.

Initially credit-reporting agencies will report accounts in arrears, typically any activity on your report is not indicated for three to six months. The credit bureaus also report accounts that are in credit counseling, certainly a positive sign to lenders that you have begun the process of getting those delinquent accounts in order. Make sure to check your reports periodically to ensure your report reflects accounts in good standing and any inaccuracies.

Don't ever assume anything, vigilance and perseverance wins the day.

FICO scores are based upon a number of criteria. Essentially your score is based upon the amount of debt available on each account versus how much debt you have leveraged on each card. The less available credit on each card indicates you've maxed out your card, thereby lowering your score. Most credit card companies require a minimum payment of five percent of each account balance, every month. Regardless of the balance on any account, you must pay a minimum dollar amount on each account, and that may result in paying $50 on six credit cards with balances around $800. That's a payment of $300 each month, it adds up. Consider the same outstanding balance (six times $800 or $4,800) with a payment of $240 freeing up $60.

Intuitively you might think that closing unused credit accounts will increase you FICO score, not so. Lenders like to see open accounts in good standing. Low balances and high credit limits do wonders for the almighty FICO. Thankfully lenders can see beyond the numbers. Consistent on-time payments will quickly have you on the road to financial recovery! The very best rates are offered to those who have 24 months of on-time payments.

Remember your reputation is everything, and so is your credit.

By the way, there certainly are reputable debt consolidation companies in the market, so you must research and compare several services in order to to determine the one that meets your specific financial situation, plus the cheaper interest rates offered. Nonetheless, it is advisable going with a trusted and trusted debt counselor before making any decision, this way you will save time through specialized advise coming from a seasoned debt advisor and money by getting better results in a shorter span of time.

Hector Milla runs the Reputable Debt Consolidation Company website - where you can see his best rated debt consolidation company recommendation.

Visit for further information and read our full review of the best debt consolidation service, plus articles and video training about how to get the most of your debt consolidation process.