How does consolidation affect your credit

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Credit Scores and Loans

Any time you contract a new debt, the date and amount is reported to the credit scoring agencies. Consolidation loans are classified as unsecured installment loans, much like credit card accounts. With a consolidation loan, your credit card balances will decrease and your cash flow will improve, assuming the loan payment is less than the total minimum payments on the cards. But contracting for an additional debt will bring a negative hit to your credit score, which is figured through a proprietary algorithm that varies with each agency.



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