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Consolidating debt and credit score

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Interest rates do not appear on a credit report; therefore, the interest rates on your credit cards do not affect your credit worthiness or credit scores.While consolidating those debts into a single payment with a lower interest rate can help you pay off debt faster, you should be wary of companies offering debt consolidation plans.

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Her work has appeared online at Bill Savings, Money Smart Life and Mortgage Loan.It is very important that you are fully committed to a debt consolidation program.Closing your credit accounts does have a negative impact on your credit score, even if it is to discourage further spending.Additionally, if the company managing your payments under your debt consolidation plan fails to make the payments on time, you are responsible, and those late payments may be reflected on your credit reports.Plus, if the company convinces you to close all of your credit card accounts, it may negatively affect your utilization and you have no way to rebuild a rich history by using those cards in the future in a responsible way.Closing credit card accounts lowers your amount of available credit, thereby changing your debt to limit ratio.

If you must close certain credit accounts, close only the most recently opened.

The older accounts carry more of your credit history.

Kristie Lorette started writing professionally in 1996.

While some may believe that deb consolidation is something to avoid, it is actually very good news for your credit score.

Taking out a new loan to pay off other loans does add one more loan to your credit history, but it also removes the older loans and marks them as paid in full.

Credit reporting agencies issue credit scores to all consumers based on your credit history.