Will Getting an Advance Improve your Credit Rating?

There are practices you can do to improve your credit rating, such as paying your bills on time, disputing credit score errors, and getting an advance.

Now, you might have taken a double look on that last entry and wonder, “Will getting an advance improve your credit rating?” Consider this — debt consolidation.

While there’s a notion that it’s something to be avoided, debt consolidation can do wonders to your credit rating. 

Can debt consolidation improve your credit rating?

Usually, debt consolidation programs involve an advance to pay off your other debts. Typically, this new advance carries a lower interest rate than your other debts.

Although, it doesn’t forgive or reduce it, debt consolidation can help you manage your debt by rolling it all into 1 monthly payment. This does add to your credit history, though, it also removes the older an advances and marks them as fully paid.

When the credit agencies see that you are paying the new an advance consistently and on time and working to resolve your debt problems, you’re seeing better credit rating days, so to speak.

Benefits of debt consolidation

A single monthly payment is one of the benefits of a debt consolidation. Likely, the interest rate on your debt consolidation is lower than rates on your other debts. Your total payout on your debt can be less with this advance than if you had many creditors.

Affecting your credit rating

Based on your credit history, credit reporting agencies issue credit scores to all consumers. These scores are used by lenders to determine your level of risk on an advance or line of credit. Therefore, taking out a debt consolidation solution can affect your credit rating.

Paying off several accounts with debt consolidation makes it seem as if you have paid off your accounts. It’s always positive to have accounts paid in full. Make sure to make consistent, on time payments on this new advance.

Things to consider when consolidating advances

Expect your credit rating to decline if you miss or make late payments on your debt consolidation. You have to fully commit to a debt consolidation program.

Even if it’s to discourage spending, closing your credit accounts does have a negative impact on your credit score. Closing credit card accounts lowers your amount of available credit, therefore changing your debt to limit ratio.

As the older accounts carry more of your credit history, close the most recently opened if you must close certain credit accounts.

If you liked our “Will Getting an Advance Improve Your Credit Rating?” and found some useful information, visit our blog space regularly for more updates on budgeting and getting out of debts.