FICO, a credit score that determines the likely hood of your paying your bills, was developed by Fair Isaac & Co in the late 1950s, and is widely accepted as a way of credit evaluation. Debt consolidation is away of consolidating all your debts into a single larger debt, to be able to repay your accumulated debts. One of the best ways to improve your FICO score is to pay off your outstanding debts. The more close your debt balance is to your credit limit, the more it affects your credit score adversely. Consolidating your debts through mortgage refinancing or a home equity second mortgage loan can help you reduce or payoff your accumulated debts.
Such loans may be 100 percent tax deductible in certain cases, and you need to consult your tax consultant.
Debt consolidation has a positive effect on your FICO score by lowering your debt-to-income ratio. The lower the ratio, the better it is for you. Your debt consolidation loan can have a negative affect on your FICO score if you:
– Make too many inquiries for loans or lines of credit
– Run up debts again after having obtained your loan
– Stop paying your bills, or paying your bills late
Loans for debt consolidation may not affect your FICO score if you do your multiple enquiries for rate shopping within span of, say, 30 days.
30 percent of your FICO score is determined by your credit card debt and revolving charges. Do not be tempted to use your credit cards whose outstanding debts you have just paid through debt consolidation. If you are pressed to use them for emergencies try to keep the balance at a maximum of 30 percent of your credit limit, and arrange to pay your bills in time. Closing your credit accounts may hurt your credit score, so keep them open BUT do not use them.
With a little judiciousness, through debt consolidation you can affect your FICO score positively.
Gibran Selman works for CuraDebt, a company providing financial and creditor negotiations, settlement, and arbitration services on behalf of individuals and small businesses.
To get a FREE Debt Analysis Online in Only 30 Seconds, simply go to our website at http://CuraDebtConsolidation.com and fill out our simple application to see if you qualify and to receive a FREE, confidential consultation from an understanding counselor.
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