Will Really Consolidating Credit Debt Enhance Customer Credit Ratings?

What effect does consolidating credit debt have on credit scores? The answer can vary, depending on the consolidation techniques applied, how many credits records, and whether the credit cards were kept active after the balances are settled completely.

A credit score and credit history use a number of criteria to produce a credit rating. One is the number of accounts open, and another is the borrowing limit on each account versus the credit available on each credit card.

If the account is retained open after the balance is settled completely then this can cause an increase in the credit standing of the individual. One of the criteria utilized to identify the credit score for a person is the account limit and account balance, with the accessible credit on each and every credit card an important factor. If the credit card is payed off and maintained active then the new credit offered is a lot greater and the balance is $0.

If a card account is not open after consolidating credit debt then this may actually damage the credit standing given by the credit rating corporation. One of the things utilized to figure out the rating is the quantity of accounts, and another is the period of time that the individual has had open credit accounts. If accounts are closed ensure that these are exactly the same accounts that were opened lately. Closing out the oldest account on the credit report is actually a large mistake.

Holding 1 or 2 card accounts open can be a smart move, but make sure these accounts are handled correctly. Once the credit debt has been consolidated the credit cards should only be utilized to make a small purchase every month or so. Give payment for the total amount immediately so that the account balance is back to zero. This will keep the accounts open and active without the threat of over the limitation charges or past due payment rates.

In most cases consolidating credit card debt will help boost the credit scores an individual is given. Greater credit ratings can lead to decrease interest rates and lower monthly bills. This action may not be right for everybody though, and should not be taken without careful consideration.