Is Debt Consolidation Good or Bad for Your Credit?

Debt Consolidation

Did you know that the average American citizen has just over $90,000 worth of debt? That number fluctuates depending on factors such as age demographic, location and education level.

While that amount can differ depending on your situation, you may have heard of ways to help reduce debt and raise your credit score, like consolidating. But, are consolidation loans a good idea?

If you’re wondering what consolidating debt will do to your current credit score, continue reading for more information.

What is Debt Consolidation?

Let’s start with answering the basic question of what is debt consolidation? It is the process by which multiple lines of debt get combined into a single line of debt.

There are a few options specifically geared toward debt consolidation. Credit card balance transfers, home equity loans, or loans to name a few. Any of these options can help you consolidate your finances into a single monthly payment.

You can start by looking at loan terms, interest rates, and budgeting constraints to improve bad credit, help avoid long-term financial stress and high credit card balances.


Keeping track of many payments to multiple lenders can be exhausting. One of the most straightforward positives to debt consolidation can be the single line of credit you’ll be chipping away at.

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For those with multiple high-interest, high-balance credit cards, having a single line of credit can help you pay down balances much faster. In addition, your risk of missing a payment will lessen due to only having one payment date to focus on.

Missing any monthly payments can impact your credit negatively. So having an opportunity with only one monthly payment can be highly beneficial.


Any time you decide to consolidate debt, you will likely have balance transfer fees, closing costs, or annual fees to contend with. It’s smart to first understand the extra amount of money you will be paying upfront to help yourself out in the long run.

Your current credit score also affects the rates you will obtain. If you’ve got a lower credit score, depending on which consolidated loan you qualify for, you may end up paying high-interest rates. This is on top of any transfer fees and additional interest to be paid for the life of the loan.

It’s important to keep in mind that just because your payments may be simplified with consolidated debt doesn’t mean you can then increase your spending. Your credit card balance may reflect $0.00, but you still have money to pay back. By looking at your underlying financial habits, you can understand where your money is going and how to keep your balances low.

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Credit Yourself Accordingly

Regardless of where you are at in your personal finance journey, gauging where your personal debt level is at and what you can do about it will inevitably pay off in the long run.

Keeping spending under control and consolidating your debt may just be the key. With plenty of online content to help you reach those goals, you can feel good about boosting your credit and starting your financial wellness journey off on the right foot.

If you’re looking for additional financial or business information, Reforbes is happy to help. Feel free to use our contact form for additional questions.

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About the Author: Nicky Bella

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