Many options exist when it comes to how to consolidate credit card debt without hurt your score. As long as you are concerned about your credit, it is best to use a method that will not negatively impact your credit. However, you should consider the following factors before deciding on a consolidation method. Here are some of the things you should keep in mind to avoid affecting your credit score. Listed below are some of the methods that won’t hurt your credit.
First, you should avoid moving your debt. By moving the debt, you will be taking on additional interest. If you consolidate your debt, you should pay it off instead of moving it to a new credit card. Moreover, you should avoid opening new credit cards, as this will only result in more debt. Instead, you should pay off existing debt as soon as possible, or you will only increase the risk of further accumulating it.
Another way to consolidate your credit is to apply for a personal loan or home equity loan. This option is often better for your credit because the new loan or credit card reduces your credit utilization ratio. Furthermore, if you are paying off your debt on time, this will boost your credit score in the long run. Credit score is composed of 35 percent of your payment history, so making on time payments will improve your credit score.
Getting a new balance transfer card with a lower APR will allow you to aggressively pay down your debt. Balance transfer cards allow you to make payments to the principle balance, lowering your balance and boosting your credit utilization ratio. These benefits are worth the temporary dipping in your credit score. However, you should be aware that balance transfers may temporarily hurt your credit. In addition, many balance transfer cards come with fees of two to five percent.
Debt consolidation is best suited for people who can afford to pay off the balance on their credit cards. Getting a debt consolidation loan with a higher interest rate may not make sense for you right now. Try to figure out why you have a high interest rate and what you can do to minimize it. If you can’t afford to pay off the balance on your current credit cards, you may want to consolidate debt instead.
While consolidating your debt with a loan can lower your score, it can boost your score in the long run. While consolidation can lower your credit utilization ratio, it will result in a hard inquiry, which can lower your score by a few points. These queries are temporary and only affect your credit score for a year. It’s also important to remember that a large credit card balance can cause a high credit utilization ratio (CLH). This can harm your credit score.
The first step in consolidating your debt is to contact a nonprofit consumer credit counseling agency. They provide free counseling to help individuals get out of credit card debt. Credit counseling organizations evaluate your debt, budget and credit score to determine whether debt consolidation is the best option for you. If you can afford the monthly payments, you may be eligible for a debt management plan. Once you find a nonprofit consumer credit counseling agency that provides free credit counseling, you can decide on the best course of action for your financial situation.