Will A Debt Consolidation Loan Ruin Credit?

For many, a debt consolidation loan may be the only viable option for getting out of debt. With a debt consolidation loan, the balance on a series of debts is negotiated down with the promise of payment in full. The payment that is presented comes in the form of the loan that has been issued. Yes, this is a rather simply concept but there are certain facts about such a process that need to be understood. Namely, there will be an affect on a person’s credit if he or she takes part in a debt consolidation program. This statement may raise a panicked question: “Will debt consolidation ruin my credit score?” This is a valid question and it is important a clear and succinct answer is presented.

Once again, it is important to point out that a debt consolidation loan will have an affect on the client’s credit rating. This is because negotiating down a debt shows that you did not and could not pay what you borrowed. So, it would make sense that a credit score would be lowered as a result. However, the use of the word ruin is a bit strong. It is also not a very accurate word either.

The use of the word ruin infers that a credit rating will be lowered into the abyss. This may not occur since the result will be lowered from where the rating may currently stand. However, there will be a noticeable impact on the credit rating. But, it will not be ruined because ruined infers a sense of finality. That is, once the score is lowered it will forever remain so and will never be repaired. This is simply not the case. A low credit score can always be raised or improved depending upon the future credit history of the individual.

By making sure that you do not get into excess debt once again and paying all your bills over time, you may be able to restore your credit to a positive rating. Actually, if you follow these steps it would be impossible for your credit to not improve. After all, you would only be contributing positive data to the score and curtailing any negatives. That alone can greatly improve a rating. As such, it simply is not accurate to use the term “ruin” with such finality.