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How does using debt consolidation affect my credit score? Should I do debt consolidation?
How does using a debt consolidation service affect my credit score? Do the credit cards have to be canceled? I have a couple that are over three years old and I would not like to lose that credit reference. I am current on all my cards and have been for over 16 months - Should I do debt consolidation?
Usually, you are not required to cancel credit cards you pay off with a consolidation loan. As you mention in your question, the primary benefit to keeping the credit cards open is to maintain your positive payment history. If you do decide to keep the accounts open, make sure that you do not charge up a new balance. A common pitfall for consumers who consolidate debts is that they then charge their credit card accounts back up, leaving them with twice the debt that they started out with. And in many cases, half of that debt is now secured by their home.
Very quickly, if you want a free debt consultation with one of Bill's approved debt help partners, click here: Debt Consoldation Quote
If you are considering a debt consolidation loan, I definitely encourage you to get rid many of the accounts you paid off with the consolidation loan so that you are not tempted to use the cards again and put yourself in a worse financial bind. You can keep one or two of the accounts open for emergencies, and to maintain accounts with a long payment history on your credit report, but you should try to pay off any charges made on the accounts at the end of each month, if at all possible. If you are interested in a debt consolidation loan, you should check out the Debt Consolidation section of the Bills.com website at: Debt Consolidation
You can also submit your information on the Bills.com Savings Center, found near the top of all Bills.com pages, and we can match you with potential loan providers to discuss debt consolidation loans options that fit your needs.
I hope this information helps you Find. Learn & Save.
Best,
Bill
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Debt statistics
If you are struggling with debt, you are not alone. According to the NY Federal Reserve total household debt as of Quarter Q1 2024 was $17.69 trillion. Student loan debt was $1.60 trillion and credit card debt was $1.12 trillion.
According to data gathered by Urban.org from a sample of credit reports, about 26% of people in the US have some kind of debt in collections. The median debt in collections is $1,739. Student loans and auto loans are common types of debt. Of people holding student debt, approximately 8% had student loans in collections. The national Auto/Retail debt delinquency rate was 4%.
Each state has its rate of delinquency and share of debts in collections. For example, in Louisiana credit card delinquency rate was 5%, and the median credit card debt was $355.
Avoiding collections isn’t always possible. A sudden loss of employment, death in the family, or sickness can lead to financial hardship. Fortunately, there are many ways to deal with debt including an aggressive payment plan, debt consolidation loan, or a negotiated settlement.
