Finder may earn compensation from partners, but editorial opinions are our own. Advertiser Disclosure

How debt consolidation affects your credit score

The positive and negative impacts of moving your debt around.

Knowing the impacts that debt consolidation can have on your credit is as important as the consolidation itself. Do it right and your scores can climb accordingly. Do it wrong and your efforts can backfire.

How can debt consolidation affect my credit score?

In the short term, debt consolidation may lower your score, but in the long run it could actually improve your credit rating.

How can debt consolidation hurt my credit?

Creditors pull a hard credit check when you take out a new loan or credit card, which temporarily lowers your credit score. Getting a balance transfer credit card can cause your score to dip even more, as having a high balance on a single credit card could hurt your score. Your credit score isn’t entirely safe if you use a debt relief company either. Even if it successfully negotiates a lower balance and better rates, your creditor might report bad debt, which hurts your credit score.

How it can help my credit?

Using a debt consolidation loan might be a better choice for someone concerned about their credit score, especially if it helps you pay off your debt on time and quickly. That’s because on-time repayments are the most important factor in your credit rating — especially your FICO rating.

No matter which method you choose, remember: Less debt means better credit. If debt consolidation can help you reduce your debt, it will ultimately help your credit score.

Tips for consolidating debt without hurting your credit

While everyone’s situation is different, there are a few ways to lesson the impact to your credit while consolidating debt:

  1. Consolidate and pay off your revolving debt first. Revolving debts like credit cards tend to have a higher impact on your scores than installment debts. Prioritizing a zero balance on your revolving debts could reduce the impact on your credit.
  2. Make more than the minimum payment. If your situation allows for it, pay more than the required minimum on your consolidated loans.
  3. Make on-time payments. Showing creditors that you can make payments in a timely manner goes a long way toward keeping your scores intact.
  4. Only apply for loans or credit cards that you know you’re qualified for. Doing this will help you avoid multiple hard credit pulls, which can negatively affect your credit.

Compare options based on credit score

Compare loan options

Name Product Filter Values APR Min. Credit Score Loan Amount
Credible personal loans
2.49% to 35.99%
Fair to excellent credit
$600 - $100,000
Get personalized rates in minutes and then choose an offer from a selection of top online lenders.
Best Egg personal loans
5.99% to 29.99%
$2,000 - $50,000
A prime online lending platform with multiple repayment methods.
Upstart personal loans
5.55% to 35.99%
580 or 600 depending on state of residence
$1,000 - $50,000
This service looks beyond your credit score to get you a competitive-rate personal loan.
SoFi personal loans
4.99% to 19.63%
$5,000 - $100,000
A highly-rated lender with competitive rates, high loan amounts and no fees.
Upgrade personal loans
5.94% to 35.97%
$1,000 - $50,000
Affordable loans with two simple repayment terms and no prepayment penalties.

Compare up to 4 providers

Compare balance transfer cards

Name Product Amount saved Balance transfer APR Balance transfer fee Minimum Credit Score Filter values
Citi® Diamond Preferred® Card
0% intro for the first 21 months (then 13.74% to 23.74% variable)
$5 or 5% of the transaction, whichever is greater

Best of Finder 2021

An impressive 21 months intro APR on balance transfers and purchases, as well as no annual fee make this one of the top 0% APR cards available.
Citi Simplicity® Card
0% intro for the first 21 months (then 14.74% to 24.74% variable)
$5 or 5% of the transaction, whichever is greater
With an intro APR of 21 months, this card has one of the longest balance transfer offers on the market. Plus, no late fees and no annual fee.
Citi® Double Cash Card
0% intro for the first 18 months (then 13.99% to 23.99% variable)
$5 or 3% of the transaction, whichever is greater
Get a strong 18 month 0% intro APR on balance transfers AND up to 2% back. This is a rare card that offers both rewards and balance transfers.

Compare up to 4 providers

Consolidating debt with good credit

Having a solid credit score can open the doors to more favorable rates and terms when you’re comparing consolidation options. If your goal is to have one monthly payment, shop around for a 0% balance transfer credit card or a low-interest debt consolidation loan.

Another option is to take out a home equity line of credit, though you should consider the risks and weigh all options before tapping into your home’s equity.

Consolidating debt with bad credit

Debt consolidation with bad credit is tricky — but not impossible. You might have to go off the beaten path to find an option that helps more than it hurts.

Getting a debt consolidation loan with bad credit

A few of your options are:

  • Peer-to-peer lenders. True, these lending services do have credit score cutoffs, but they tend to be lower than what you’ll find at a bank.
  • Credit unions. As nonprofit financial institutions, credit unions also have lower credit requirements than for-profit lenders.
  • Secured loans. Get more favorable terms on your debt consolidation loan by putting up collateral.
  • Applying with a cosigner. Having a friend or relative with good credit back your loan makes you less of a risk to lenders and could get you a better deal. Learn about which lenders accept cosigners on personal loans by reading our guide.
  • Credit counseling. Some nonprofits designed to help people get out of debt offer counseling. They can even negotiate with lenders — though you might have to pay them a fee.

I’ve paid off my debts. When will my credit score update?

Once you’ve paid off your debts, it can take anywhere from one to two months for the credit bureaus to update your scores. Though paying off debt will likely result in a score improvement, keep in mind that your credit history and past debts will not be erased and may still show up on your report for up to seven years.

Bottom line

Consolidating your debts into one monthly payment can be an attractive option, but it’s important to understand the resulting positive and negative impacts to your credit score.

Before making any moves, compare your debt consolidation options. And if your debt gets too much to handle, you can always look into a debt relief company.

Picture: Shutterstock

More guides on Finder

Ask an Expert

You are about to post a question on

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked provides guides and information on a range of products and services. Because our content is not financial advice, we suggest talking with a professional before you make any decision.

By submitting your comment or question, you agree to our Privacy and Cookies Policy and Terms of Use.

Questions and responses on are not provided, paid for or otherwise endorsed by any bank or brand. These banks and brands are not responsible for ensuring that comments are answered or accurate.
Go to site