Planning and Credit Report Impact

Whatever approach you take to loan consolidation, you want to make sure you have planned out all the steps ahead of time and your responses to changes before getting involved. That means you need to have a budget and financial map on how you will manage your new credit consolidated loan with your living expenses and income. You also need to make sure you understand what a larger, longer term, loan means in terms of how much you will overall.

The impact to your credit score rating depends on how you go about consolidating your loans. Swapping out multiple loans with one big one and keeping up with your regular payments probably won’t change your score much. It will improve over time, however, as you record of successful payments continue and the total amount borrowed goes down.

Using a liaison service however, allows some accounts to go delinquent. If you weren’t already in trouble, this approach will definitely lower your score as more accounts get reported as going bad. If you’re sensitive about protecting your credit score, this is not the approach to take. If, on the other hand, you’re already about to go delinquent and can’t borrow a consolidated loan due to bank denial, then it doesn’t really matter so much. The question then is, do you want to personally play hardball with your lenders pushing for settlements, or do you want to pay someone else to do that? If so, then the liaison route is good for you.

Keep in mind, letting any accounts go delinquent puts you at risk for collection and ending up in court fighting off judgments. While unsecured loans are generally too small for lenders to spend an attorney on, collection agencies who buy these loan accounts for 10 cents on the dollar are far more aggressive and can make your life miserable. One common, and illegal tactic, is for the collector to find out who your employer is and to call them at their home at night complaining about your non-payment. Nasty is the name of the game to squeeze payments out of debtors.