 TITLE: Can Debt Consolidation Affect Your Credit Score? CONTENT: Debt consolidation has the potential to hurt your credit score in several ways, depending on which method you use. For people using a debt management plan for consolidation, it is important to fully understand your agreement with your credit counselor. It is also important to know whether you are working with a credit counselor from a not-for-profit organization, or if you are working with a for-profit debt settlement\/consolidation firm.\n### Credit Counselors and Debt Management Plans\nCredit counseling organizations are typically non-profits that exist to advise people on how to manage their money and establish budgets. Sometimes, credit counselors work with you to develop a debt management plan and can also help you make your payments.\nAlthough debt management plans do not appear on your credit reports, credit counselors may sometimes require that you close your other credit accounts to ensure you don't spend outside of your repayment plan. Closing revolving credit accounts will increase your overall credit utilization ratio—which will impact your credit scores.\nIt is important to make sure that your credit counseling organization makes all payments for you on time. Credit counseling organizations typically make the agreed-upon debt payments for you each month, and so the responsibility is on them to make sure they pay each bill on time.\nPayment history is the most important factor in calculating your credit score—accounting for 35% of your FICO® Score☉ —and it is important to avoid any late payments being recorded on your credit file.\n### Debt Consolidation or Debt Settlement Companies\nDebt Consolidation Loans\nWith a debt consolidation loan, it is important to first know what range your credit score falls into. For people with a \"poor\" credit score it may be difficult to get approved for a new loan to use for consolidation. People with \"fair\" to \"exceptional\" credit scores will have an easier time getting approved for a new loan, and will also be eligible for a lower interest rate.\nKnowing your credit score before you apply for debt consolidation loans will help you choose the right loan and avoid incurring multiple hard inquiries in a short period of time. END