So whether it’s a consolidation loan, credit card shuffle, or DMP, know your options so you get there just a little faster.In recent years, peer-to-peer (P2P) lending opportunities have increased the options for people looking for a debt consolidation loan with bad credit.But that begs the question—does debt consolidation help or hurt your credit?The answer depends on how you consolidate and what you do with your debt afterward.Otherwise, you may fall into traps such as getting stuck with a balance at a high interest rate after the introductory period ends. Keep your eyes peeled for any “but” or “until.” Effect on Your Credit: It depends on how you use a transfer.
Transferring a high-rate credit card balance to a card with a lower rate is another way to consolidate.According to FICO, the company behind most of the credit scores used by lenders, consumers with high credit scores (e.g. Specifically, two-thirds of consumers with good credit carry less than ,500 in non-mortgage debt, and they use an average of 7% of their available credit on their credit cards.That means that paying off debt—whether you use a consolidation loan or just put every penny you can toward your debt—will often improve your credit ratings in the long run.These programs are available regardless of credit scores, so if you are having trouble consolidating, a DMP might be worth considering.Tip: If you choose to move forward with a DMP, you should close or suspend your credit card accounts.
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a loan with fixed monthly payments) may actually benefit your credit rating, especially if you use the loan to pay off credit cards that are near their limits.