Does Consolidating Credit Cards Hurt Your Credit?

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Consolidating credit cards hurts a person's credit because it is a sign to credit card companies that a person is having trouble with their credit card payments. Find out what research needs to be done before consolidating credit cards with help from the owner of a debt negotiation company in this free video on debt and money management.

Part of the Video Series: Debt Consolidation & Management
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Video Transcript

Hi my name is Peter Repak. I am the owner of Clear Financial LLC. Does consolidating credit cards hurt your credit? Yes. The answer is simple. The reason why it does. Because once you start to consolidate your credit card debts with a consolidating agency like a credit counseling agency. What happens is that you perform and you tell that you are unable to handle your credit card debts. This is automatically giving a flag on your credit score and your FICO score. What happens is actually these credit card companies at one point in 1960 they found out that there are people who are unable to pay their debt back. What they did at that time during the 1960s, they said, ok we're going to create a company, a non profit company, to collect money from people. So what they did, they set up these companies. What they do is they collect all of your payments into one and they distribute it throughout your creditors. But what, again, you do at this time is you say to the creditors, look I can't handle my finances myself. Here is, you do it for me. They do it for you. They probably lower your interest rate because the credit card company is telling them that your interest rate is going to be such and such at the beginning of each month. However, what you need to know about this. It is one of the worst things that you can actually do because your debt to income ration stays exactly as what it was. Meaning, your debt didn't disappear and at this time your credit is getting a hit because you can't handle your debt. That is what you have demonstrated and at the same time you still owe the same amount of money. But you do have to do your research about this. Again my name is Peter Repak. I'm the owner of clear Financial LLC. It's a debt negotiation company. Thank you very much for watching.

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