Does credit card consolidation hurt your credit?

Credit card consolidation is the process in which borrower request that lenders agree to a lower monthly payment, a lower debt payment amount or other terms. Credit card consolidation is a process in which the terms of the original agreement are voided. Because of this, it can reflect negatively on a credit score, depending on how the debts are repaid. The most common form of credit card consolidation is through credit counseling services or through debt settlement. In either case, your credit score could be negatively impacted.

How Consolidation Affects Credit

When you use credit card consolidation, you are no longer abiding by the rules of the credit card offer, which in turn leads to a situation in which the creditor is losing money. The creditor is likely to report this to the credit bureau. Here are some things to keep in mind.

• The agency managing the consolidation is likely to collect funds from a borrower and then pay those funds to creditors. In most cases, the creditor works with this agency to get the amount of payment (either in total or the monthly payment) lowered. This means the debt will not be paid in full.
• Credit consolidation can take months to get in place. During that time, you may be reporting no payment on a credit report.
• In some situations, credit card consolidation can be a good thing for a credit report, especially if it gets the user back on track to paying down credit they did not previously pay on.

Credit card consolidation is a big step. Discuss what it will do to your credit with a debt settlement attorney.