 TITLE: Bankruptcy or Debt Consolidation: Which Is Better for You? CONTENT: How Do Bankruptcy and Debt Consolidation Affect Credit?\n-------------------------------------------------------\nBankruptcy does major damage to your credit. A Chapter 7 bankruptcy, because it stays on your credit report for 10 years, is probably the single worst negative event that can show up on your credit report. Bankruptcies adversely affect your credit scores the whole time they appear on your credit reports, and even though their score impact diminishes over time, many lenders won't even consider a credit applicant with a bankruptcy in their credit report.\nDebt consolidation can have a positive or negative impact on your credit, and even both at once.\nIf you use a personal loan to pay off credit cards with high balances, your credit scores could improve because of a lower credit utilization ratio—the percentage of a credit card's borrowing limit represented by the outstanding balances on the card. Credit card accounts with balances that exceed about 30% of their borrowing limits can have a negative impact on your credit scores, so replacing those balances with a personal installment loan could help your scores.\nOn the other hand, using a balance transfer credit card to consolidate multiple credit cards and loans could create a high-utilization situation. If the total amount transferred to the new card exceeds 30% of its borrowing limit, that will likely have a negative influence on your credit score—but if the cards you're paying off through the balance transfer had high utilization, the net impact on your credit scores might be insignificant.\nLike credit cards, personal lines of credit and HELOCs are forms of revolving credit that allow you to borrow against a limited amount of funds. High utilization on those accounts could also hurt your credit score.\nCredit utilization is responsible for about 30% of your FICO® Score☉ , which means that high utilization can hurt your credit scores, but also that your scores will respond relatively quickly as you lower your credit utilization. If you're confident that you can pay down a revolving balance quickly, it may be worthwhile to take a temporary credit score drop in exchange for significant savings in interest payments. END