Credit card consolidation – Consolidate all cards into one
How to consolidate credit cards
The best way to consolidate credit cards is to choose an option that has maximum pros and minimum cons. Ideally, you should try to take advantage of all the benefits and eliminate your debts as soon as possible.
What are the other ways to reduce credit card debts?
How does credit card consolidation affect credit score?
Credit card debt consolidation can help to increase your credit score depending on the strategy you choose. For instance, if you’re transferring balances onto one credit card, then make sure you don’t max out the credit card’s limit. It will increase your credit utilization ratio.
If you’re taking out a credit consolidation loan, make sure you pay it off as soon as possible. When you replace multiple bills with a single loan, you’re actually bringing your credit utilization ratio to 0%. This gives a big boost to your credit score. However, you’re forgetting one significant point. You’re are now left with a new loan. If you have no other loans or debts, then your total utilization ratio is 100%, which is again bad for your score. So you have to take steps to repay this new loan as early as possible.
Don’t close your credit cards after completing the credit card consolidation program because that will drop your credit score. When you keep your old credit cards open, you get dual benefits. First, the long credit history makes a positive impact on your credit score. Secondly, you won’t increase your credit utilization ratio. Ideally, you should maintain a 30% credit utilization ratio for having a good credit score.