It is possible for debt consolidation loans to boost your credit score. Similar to using a credit repair company, it is essential to do proper research before committing to any debt consolidation loan or program. There are at least two ways to view and use debt consolidation to your credit-boosting advantage.
What are the differences between a debt consolidation loan and program? A debt consolidation program is more likely to be geared towards a person with bad credit. These programs help build and repair credit by paying off most of your outstanding debts, and charging you one monthly payment.
The monthly payment still includes an interest/finance charge (APR).
The APR is ideally lower than the average of all the APRs combined for your previously outstanding debts. Even if the APR on a debt consolidation program is higher, your credit is still boosted. This is due to the multitude of previously outstanding and open accounts with high balances that are removed from your credit report.
For example, it is better to have one outstanding debt than ten. It is also possible for a debt consolidation program to spread the repayment terms out over a longer period of time. The latter reduces the amount you must pay each month and gives you more financial flexibility.
Debt consolidation loans are different. These loans are more reliant on your credit score and income level for qualification purposes. Debt consolidation loans work for people who already have good credit but want to improve it to a great credit status. Regardless of where your credit score starts, debt consolidation is capable of giving it a boost.