One of the questions which you might be asking whilst deciding about debt consolidation is what it will do to your credit rating.
This is a good question to ask, as your credit rating is used by banks to calculate your credit worthiness and if you are a suitable person to lend credit to. They will use your credit rating to gage the probability of you repaying back the debt.
A credit rating becomes poor when you have defaulted on your credit commitments, such as missing payments to your debts as they fall due. Although one or two missed payments should not make much of a difference; long term failure to make payments means that you may be refused credit in future or that you will only be accepted at a higher interest rate.
Other ways that you could have negatively impacted your credit rating is if you have any CCJs or defaults against you.
What will a debt consolidation loan do to my Credit Rating?
Making your debts more affordable through a Debt Consolidation loan may be a good idea if you are struggling with debts.
Using a debt consolidation loan to pay off your debts should not have any negative impact on your credit rating, as long as you ensure that you meet the payments as they fall due.
Your credit file will show that you have a debt consolidation loan but it will also show that all other forms of debt have been paid off. As long as you don’t miss any payments to your debt consolidation loan and you don’t take out any further forms of debt, then your credit rating will not get any worse and should improve.
The above talks specifically about a secured debt consolidation loan. There are other forms of consolidating your debt, such as through no loan consolidation, and these will affect your credit rating in a different way.
Getting professional debt consolidation loan advice is the best way forward if you are thinking about how to make your debts more affordable. Our professional debt advisors will be able to go through your circumstances and give you the best debt consolidation advice about how and if your credit rating will be affected by your debt consolidation loan.