Consolidating credit card debt without hurting your credit
No matter your approach to debt consolidation — 0% APR balance transfer credit card or personal loan — you’ll experience a smaller dip in your credit score if you keep old accounts open after paying them off.Some debt management programs offered by credit counseling services will require you to close these accounts, however.So if you’re hoping to consolidate your debt with a 0% APR balance transfer credit card or a personal loan, your credit score will take a hit. The effect on your score is small, and it only lasts for up to a year — and having more and different types of credit is a net positive where your score is concerned, as long as you manage it responsibly.Your credit utilization ratio — that is, the amount of available credit you use — has a huge influence on your credit score.Ask your lender to provide rates for you on a debt consolidation loan versus a cash out mortgage so that you can compare and choose between the two.The interest rate for the cash out mortgage may be cheaper than the debt consolidation loan, however, this is depending on your credit score.When it comes to personal finance, there are few topics that are discussed more often than credit scores.It doesn’t seem like a simple three-digit number would have that much impact on how you manage your money, but your score shapes whether you’re able to make a big purchase or qualify for the best rates on loans.
When you apply for a new line of credit, whether it’s a card or a loan, you’ll trigger a credit inquiry.Carrying around a boatload of debt doesn’t do much to improve your score, but the way you pay it off could also have an adverse affect.If you’re trying to dig your way out from under high-interest credit cards, student loans or a car loan, taking steps to protect your credit score in the process is vital.In terms of the impact each type of credit has on your score, revolving credit tends to weigh a little more heavily.When you’ve got a choice between paying off a credit card or two and tackling an installment loan, you’re better off wiping out the revolving debt first. It has a more positive impact on your credit utilization ratio, which is the amount you owe compared to the total amount of credit you have.