What Credit Consolidation does to your CIBIL Score?

If you are neckline profound in debt and all your debt has begin to harm your credit score, you can think a credit consolidation plan. Credit consolidation does not signify that you no longer require paying off your debts; it just means that you need to discover a quicker and more efficient way of doing it, with no getting bogged down with the load. While credit consolidation is aimed at creation your life easier, the query to be asked is whether it will help or hurt your credit score? The answer is credit consolidation if done well be supposed to assist you improve CIBIL score.
What is credit consolidation?
Before we look into the impact of credit consolidation on your CIBIL score, let’s take an early look at what credit consolidation means. Just put, it is the procedure of captivating one large loan to pay off lesser debts. The thought is to make one single payment instead of making multiple payments. There are diverse ways and means to carry out credit consolidation and it must be complete with the proper credit counseling so that it does not hurt your credit score but enhances your CIBIL score instead.
You can either do it yourself if you have the knowledge and dexterity required to do so or you can approach a credit health management company such as Finheal. Companies can not only help you consolidate your credit, so that it is easier for you to disburse off your debt , it can also help you assemble your finances and praise in a manner so that it becomes easier for you to keep and increase your CIBIL score in the future as well.
A loan in lieu of credit card debt
Often people get into debt traps because of high credit card debt. And if you have a large outstanding credit on multiple credit cards, you are sure in for trouble as the rate of interest on credit cards can run as high as 36-40% annually. If this is your case as well, you can consider taking a loan against an asset such as gold or even a personal loan on which the rate of interest is 13-16%. You can then use the proceeds of this loan to pay off all the outstanding debt on multiple credit cards and service only one loan at a lower rate of interest.
The home loan way
Another way to consolidate your credit is by making use of your home loan. You can take a top up loan on your existing home loan in order to pay off your multiple loans. If you have a good track record in servicing your home loan, you are eligible for a top up loan over your existing home loan. In fact, when you are applying for a home loan and comparing home loans, it is a good idea to make some additional enquiries about the rates of a top up loans so that it is easy for you to avail of one if you need one later. If you decide to take a top up loan on a home loan with the purpose of consolidating your credit, do specify the same. It is of most significance to maintain transparency with your lender and credit card issuer while making any attempt to consolidate your credit.
How credit consolidation can harm your CIBIL score
Any new loan or a credit card you take will result in a “hard inquiry” on your CIBIL report. This means your CIBIL score will go down one way or the other. However, the effect of a hard inquiry is temporary and shaves off a few CIBIL points at a time. The thing to bear in mind however is that credit consolidation will eventually add to your CIBIL score; because you are paying off a chunk of debt in one go. You must consequently look for a credit consolidation solution that is best suited to your needs and does the least amount of damage. It is thus best to take professional help from a credit health company such as Finheal that can help you chalk out a reasonable credit answer for you.
If you are thinking about credit consolidation, it is obvious that things have gone incorrect somewhere for you. Credit consolidation if complete well, will bring back your calm of mind and will bring with it a precious lesson that in order to build and increase your CIBIL score, it is very important to maintain utmost financial discipline.