What a Loan Consolidation Service Can Do for Your Credit

If you are struggling with poor credit scores, a loan consolidation service can help you raise your scores while allowing you to restructure your debt into manageable payments. Allowing a poor credit rating to persist will inhibit your ability to get loans or credit cards in the future. Large purchases like a home or a car, may become impossible. A loan consolidation service can help you put these credit problems behind you.  

Your Credit Rating

Your credit history is tracked by three major credit agencies; Equifax, Experian and TransUnion. These agencies keep track of things like whether you have missed or been late on payments, how much debt you are in, and how many credit cards you have. A poor credit rating can have a major negative effect on your power to borrow. The biggest reason why people have poor credit ratings is late or missing payments. Credit consolidation services can help you find solutions for making payments and repairing your credit.

Debt Management

The financial services that consolidation companies offer are collectively called debt management. Loan consolidation means that the company takes on your debt and reorganizes it into a new loan. When your loans are consolidated, they are made into one collective debt, rather than several smaller ones. This means that you can pay one monthly fee, instead of several bills a month. This usually means lower interest rates, and makes the debt easier and faster to pay off. This can significantly help your credit rating, once you have built up a record of on-time payments.

Credit Counseling

Many consolidation services offer credit counseling, or can set you up with an independent counselor or counseling agency. Your loan counselor will help you understand your financial situation and give you tools and skills to better manage your finances. Many counselors, for example, will help you make a monthly budget. Seeing a credit counselor in itself can help your credit; some creditors will reduce your penalties or even erase records of previous late or missed payments if they see that you are making a good effort to improve your situation.

A Word of Caution

If you are in serious debt, a loan consolidation service can be of great benefit to you. However, if you are not in major debt and do not have significant trouble making payments, getting your loans consolidated or seeing a credit counselor can actually hurt your credit. 

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