Does consolidating debt via a debt consolidation loan affect your credit score? Definitely. But does it affect it negatively? That’s a more difficult question. Credit score calculations are very complex entities involving many factors, so it’s not a cut-and-dry issue as to how they are impacted by debt consolidation loans. Certain aspects of consolidating your debt will have a positive effect and other aspects will have a negative effect. What you are probably going to find is that your credit takes a hit in the short-term, but ends up improved over the long-term, assuming all debt payments are made in a timely fashion. At one time, creditors who dealt with loan consolidation companies would report a status of “third-party assistance” to the credit bureaus, which had a negative effect on your credit rating. Fortunately, creditors are more enlightened these days and debt consolidation is very common. Just th how to dispute credit report e act of consolidating your debt does not in itself do any damage to your credit rating. What does do some damage is the way the consolidation process works. When a consolidation company begins the process of negotiation with your creditors, your debt repayment may be suspended. This results in the possibility of late payments being reported to the credit bureaus. So for a while, possibly up to four to six months, you may have late payments recorded on your credit report, which will drive your credit score down. Even after your original creditors begin receiving payments from your credit consolidator, some creditors require three months of payments before they will make a positive report to the credit bureaus. Once everything is settled, the credit card companies will no longer report you as a delinquent account. However, it is important that your debt consolidator dictate this requirement to your creditors.
