Debt consolidation loan to improve my credit score
Understanding your credit score is important. You need a good credit score to apply for a mortgage, take out a phone contract and to apply for additional credit further down the line, to name but a few things. If you find yourself struggling financially because of a number of debts and have a poor credit rating as a result of missed payments, then a debt consolidation loan may well be key to getting your debts under control and improving your credit score at the same time.
What is a debt consolidation loan?
Sometimes, debts spiral out of control and you have repayments to different lenders leaving your bank account sporadically throughout the month. Understanding where your money is going should be at the forefront of your mind but sometimes, that’s hard to do when you don’t know when the next repayment is due to go and for how much.
Taking out a debt consolidation loan can resolve this feeling of not knowing. A debt consolidation loan is a way of combining multiple debt balances into one simple loan. Not only does this give you the much-needed knowledge of exactly how much money you owe, but it also provides you with the option to repay this debt in one single monthly payment, as opposed to spreading across multiple payments to multiple lenders. Having all of your debts in one place means that not only do you know exactly how much you repay on a monthly basis, but also makes it much more likely that you will make the repayment. This is because you won’t accidentally miss a repayment due to being caught up in your other outstanding payments, meaning that your credit score won’t take an unnecessary and unexpected hit.
How will this help me improve my credit score? Can it make my credit score worse?
Debt consolidation loans are there to help debt become much more manageable – if you’re able to start repaying your debts effectively, then your credit score will rise alongside it. As is always the case with debts, failure to repay the money you owe in line with the terms of your repayment agreement can affect your credit score.