Question: If I’m eligible for a debt consolidation loan will my credit be affected?
Debt Consolidation and Credit Score
When you apply for a debt consolidation loan a note appears on your credit report that a credit check was performed. If you get the loan, your credit is not harmed. However, if you apply for a number of loans and are rejected, your credit report will be harmed. We therefore recommend that you discuss this with your lender, and only apply if you have a good chance of getting the loan.
This only applies to a true debt consolidation loan. You should beware of ‘debt consolidation’ offers that are really informal debt settlement programs. These are agencies that suggest you pay a monthly fee to their company in return they will help you consolidate all of your debts into one payment. They will then negotiate a settlement with your creditors. These types of informal debt consolidation efforts are not always successful and can leave you with worse credit than when you started.
If you are turned down for a debt consolidation loan, you may want to read our article about What To Do When The Bank Says No.