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Insurance and consolidation loan tips
The debt consolidation company settles the debt on your account with the creditor and takes on that responsibility. usually debt consolidation companies give you more than you will need to settle the debt. The idea behind this account strategy is that since you were initially in debt it stands to say that you cannot make any significant commitment in the next three months and so the consolidation loan sometimes gives you this credit to enable you have ample time to settle and start a consistent repayment.
Once an account is included in this type of program, the creditor will close the account. Closing your credit cards will cause your credit utilization rate to increase, which can hurt credit scores. The creditor may also add a statement to the account that indicates the payments are being managed by a debt consolidation company. This statement may be viewed negatively by lenders who manually review your report.
can debt consolidation improve credit.
Yes Debt consolidation will improve your credit score in the long term provided you pay your debts on time. Usually immediate debt consoolidation loans tend to decrease your credit score because of the implementation of credit utilization. However when the loan repayments are on schedule it will improve the credit score of thr debtor significantly.