Credit card debt consolidation?

[FN Phat]

I have a fair ammount of credit card debt that was accrued during a time of unemployement. I have cancelled all but one, while I am working on paying them off. Some have higher precentages than others, with the highest being around 21%.

My question is this: Does consolidating your credit card debt to one loan bad for your credit score? If so, should I be too concerned with the hit as I have purchased my vehicle and home already? Any idea how bad it would ding my credit score?

It seems to me that I would be better off having my debt paid off quicker than paying more interest than necessary. Thoughts, comments, and questions appreciated.

TIA.

[Mormon Red Death]

check your boardmail.

[Katy Lied]

Please tell the rest of us. I am thinking of cancelling 2 of my credit cards.

[ERCougar]

I think your credit takes a hit when you cancel credit cards. Just cut them up if you can't stop using them. I also think it takes a hit when you open up new accounts (like a debt consolidation loan) or if you were to do large balance transfers.

But if you've already taken out your loans for the immediate future, I wouldn't think that it matters much. Neither of these hits would be something you can't recover from over the next year or two.

[Drunk Tank]

Also, if you use a debt consolidation company to get a reduced interest rate, they usually cancel the card, and it goes on your credit report as "credit counseling". It can be almost as bad a bankruptcy. We did this years back, and our loan officer when we bought our house told us we would have been better off filing bankruptcy. We only did it to get a consolidated payment, and they didn't advise of us the negative impact to our credit report.

[Mormon Red Death]

Please tell the rest of us. I am thinking of cancelling 2 of my credit cards.

cancelling credit cards are fine but the thing to keep in mind with them going away is the amount of credit you have available versus how much you are using.

For example if you 3 credit cards whose limits are the following:

CC1 limit 5,000 balance 0
CC2 limit 10,000 Balance 0
CC3 Limit 15,000 Balance 15,000

right now the amount of credit used to credit available is 50%. If you got rid of credit cards #1 and #2 then your percentage would be 100% and would be a hit to your credit.

I'm not saying don't do it but if you do make sure your % of used credit versus credit available is not completely out of wack or you dont have to make a big purchase like a car or house for a year or so.

[Clark Addison]

cancelling credit cards are fine but the thing to keep in mind with them going away is the amount of credit you have available versus how much you are using.

For example if you 3 credit cards whose limits are the following:

CC1 limit 5,000 balance 0
CC2 limit 10,000 Balance 0
CC3 Limit 15,000 Balance 15,000

right now the amount of credit used to credit available is 50%. If you got rid of credit cards #1 and #2 then your percentage would be 100% and would be a hit to your credit.

I'm not saying don't do it but if you do make sure your % of used credit versus credit available is not completely out of wack or you dont have to make a big purchase like a car or house for a year or so.

MRD is right. Utilization (CC balance divided by limit) is a significant part of your credit score. Early in our marriage, we had a time where we racked up credit card debt, and were over 90% utilized on our three credit cards. We had no other credit problems, but our FICO score was around 680 or 690. Without paying any of them down, I opened up a new card with a large line. Shortly after that, our score went up to 720 or so, maybe a little lower. Once we got all the cards paid off, we were around 800.

Credit counseling services will also hurt your credit. Threre are a good number of banks that will disqualify you for certain loans if they see a credit counseling trade on your bureau. If you are not looking to apply for credit in the near future, though, they can be useful.

[Green Lantern]

Credit counseling services will also hurt your credit. Threre are a good number of banks that will disqualify you for certain loans if they see a credit counseling trade on your bureau. If you are not looking to apply for credit in the near future, though, they can be useful.

This is pretty accurate. Be wary of lenders who tell you that "you might as well have filed bankruptcy." That's usually B.S. The underwriters at the mortgage company I worked at treated debt management programs far differently than BKs.

Also (in response to KL's comment above,) in the credit repair company I work for now, the caseworkers will almost always tell you to just stop using credit cards rather than cancelling them. MRD's scenario is a good illustration of debt/credit ratios and how they get factored into your credit score.

[statman]

MRD is right. Utilization (CC balance divided by limit) is a significant part of your credit score. Early in our marriage, we had a time where we racked up credit card debt, and were over 90% utilized on our three credit cards. We had no other credit problems, but our FICO score was around 680 or 690. Without paying any of them down, I opened up a new card with a large line. Shortly after that, our score went up to 720 or so, maybe a little lower. Once we got all the cards paid off, we were around 800.

Credit counseling services will also hurt your credit. Threre are a good number of banks that will disqualify you for certain loans if they see a credit counseling trade on your bureau. If you are not looking to apply for credit in the near future, though, they can be useful.

All CCCS firms are not created equal, however. Some are about as honest and fair as a payday loan operation. Others are truly in it to help people. Do your due diligence...