Can Taking A Debt Consolidation Loan In Mckinney Hurt Your Credit Score?

 How much and how long a debt consolidation loan will affect your credit score depends on the method of consolidation you use. Debt consolidation may positively affect your credit, but it may also hurt your credit score. With debt consolidation, all your credit card bills are combined into one debt with lower interest, giving you only one monthly payment. There are different debt consolidation methods that can have either a major or minor impact on your credit score.

How Debt Consolidation affects your Credit Score

Taking a Debt Consolidation in Mckinney  can hurt your credit score in a few ways. This is because many levers are pulled at once to help you deal with the debt at hand. Some of the ways it can hurt your credit score include the following; 

• New credit account

After debt consolidation, you may decide to open a new credit account for a personal loan or a credit card. However, this will lower your credit score as lenders look at your account as a new risk. No lender likes a new account; therefore, your credit score might take a temporary dip when you take a new loan.

• Could lower the average age of your account

The average age of your account is used to determine your credit score. This will give the average time you have had your accounts open and the overall length of your credit history. Opening a new account as a debt consolidation plan, the average age of the account will decline, lowering your credit score. It is also important to consider that debt relief or Credit Counseling in  Texas will also impact your credit score.

• Could cause inquiries on your credit

Before starting the debt consolidation process, you have to apply for a balance transfer credit card or a personal loan. This can further damage your credit score. The creditors will have to perform a hard inquiry into your credit history to check for your creditworthiness. Every inquiry reduces your credit score by some points. If you are unable to qualify for any of the above methods, getting debt relief in McKinney instead of debt consolidation may be the right solution.

Debt consolidation helps lower the interest, but it may hurt your credit score in the short term. It may also improve your credit score. However, by making regular on-time payments on the consolidated loan, you may improve your credit score dramatically. Therefore, ensure you establish a good payment history and get rid of your debt faster.

If you are in financial hardship and have poor credit scores or cannot make your monthly payments, consider a credit counseling program or a debt relief program that uses debt settlement. These programs can lower your payments, interest, or even your debt balances without the need to qualify for a new loan. 


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