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Question for the Money Doctors

Question submitted on Jun 3, 2014.

Question

Will having a debt consolidation loan look bad on my credit report?

Answer

Anytime you take on new debt, it can affect your credit rating.  Just the act of applying for new debt can decrease your score.  The credit score is based, among other things,  on a ratio of your debt balance to your total credit.  Depending how the debt consolidation loan is structured, that might cause your rating to decline.  A big factor is that once you take another loan to repay some existing debt, it's important that you don't run up new debt on the old cards.   If done correctly, debt consolidation can be a good long-term strategy to improve your credit rating and your financial footing. It can help by making your payments more affordable and by decreasing the interest rate on your loan.  As part of  making your financial situation stronger, you should consider consulting a credit counselor and/or a financial planner who can assist you in your overall financial strategy. Visit www.findacpapfs.org to find a CPA/PFS near you.


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