Consolidating debt affect
And as long as you made all of your program payments on time, you typically shouldn’t have any credit damage.In fact, since you reduce debt and build a good credit history, you can actually improve your credit score over the course of a successful DMP.When people mention debt consolidation, they are usually referring to one of two different methods.The first is the kind you describe, where you apply for a personal loan, preferably one with a relatively low interest rate, and then use the money from that loan to pay off all your credit card balances at once.
The issue, is that in many cases, you’re in a DMP because you’re already on some shaky financial ground.
Once an account is included in this type of program, the creditor will close the account.
Closing your credit cards will cause your credit utilization rate to increase, which can hurt credit scores.
If you reduce your debt by paying it off quickly after consolidation, then you’re in a better position when you apply for a mortgage.
So it most cases, debt consolidation is a good thing to do before you buy a home, rather than a bad thing.