Will consolidating my student loans improve my fico scores
The main benefit of consolidating government-backed student loans is streamlining the payment process.
The interest rate for your new consolidated loan will be based on what your past interest rates were and will most likely not be lower.
It is used as a method of reducing or eliminating debt.
Debt consolidation has the potential to hurt your credit score in several ways, depending on which method you use.
Depending on whether you have private or government-backed loans, consolidating can bind you to a higher monthly payment or longer term.
Debt consolidation is typically used by people who have mounting debt and want to reduce the number of lenders they have to pay each month.
While eliminating or lowering your debt may help your credit score over time, debt consolidation is not typically used as a strategy to increase your credit score.
As you roll revolving credit debt into a debt consolidation loan, and if you keep your balances on those accounts low, this can help to reduce your credit utilization and in time help boost your credit score.
While you can consolidate many different types of existing debt, it is important to first know what the interest rate is on your current loan in order to see if debt consolidation will be helpful.
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Federal student loans can be consolidated through the Federal Direct Consolidation Loan Program.