Does debt consolidation hurt your credit score?
When my friend first suggested debt consolidation, my first concern was whether it would hurt my credit score.
The truth is, debt consolidation is not harmful. It can actually be a smart move if you handle it well. What really matters is how you manage the new loan after getting it.
However, you should remember that applying for a consolidation loan triggers a hard inquiry. So your credit score may dip slightly at the start.
But once you begin paying the loan on time, your repayment history strengthens and your score gradually improves. Here is what I keep in mind with debt consolidation:
- Missing even one EMI can negatively impact your credit score.
- If I take a new debt while consolidating, then it can cancel out the benefits.
- I always check whether my utilisation ratio improves after shifting balances.
- I monitor my credit report to see the impact of consolidation over time.
So, while debt consolidation may cause a small dip initially, it usually helps in the long run if you stay disciplined.
In my experience, it has been more of a steady benefit than a setback, especially when you have multiple loans to repay and you are struggling.