Bad Credit and Student Loan Consolidation Can Be Good Partners

September 28, 2011 by  Filed under: Debt 

Former students are often faced with multiple student loans once they are in the workplace and earning a decent salary. They may consider loan consolidation for all those loans, but they have a dread that it may hurt their already not-so-good credit rating. Is consolidation a smart move? That depends on your financial situation. Many issues demand consideration.

Consolidating student loans is a good idea for some, maybe not so good for others. Many venues exist to consolidate loans and the way is somewhat cluttered. Possible repayment plans and other intricacies demand that any consolidation be tailor-made. Often, consolidation can save the borrower money, sometimes not. If it does not, it may be that consolidation gives you a lower monthly payment.

Student Loan Consolidation and Credit Ratings

Life is somewhat easier with a loan consolidation. Instead of having a bunch of pesky payments, all due on a different day of the month, at different payment amounts, with different interest rates; you only pay one bill, once a month on the same day, at the same amount, and at the same interest rate. But, what about your credit rating? Will it put a skull and cross bones on your credit reports.

Consolidating your student loans will not hurt your credit. In fact, it could even help it. Credit bureaus have a two ways they look at debt – there is bad debt and good debt. As an example: Credit card debt is considered bad debt. They do not do anything but entice debt. Student loans are seen as good debt. You pulled a student loan so you could get a better job and increase your salary, it is an investment in the future.

Watch Your Credit Rating

As mentioned earlier, consolidation may even increase your score. Take an example: If you have six student loans, that is listed as six different accounts, all of which demand a monthly payment. A student loan consolidation will roll all those debts into one. As far as the bureau is concerned, that single debt is much nicer than six debts and your rating mounts.

Hopefully your payment rate is less than the sum of all the single debts you were paying. Having a lower monthly obligation is again looked on favorably by the bureau and your potential lenders. Paying off student loans before consolidation probably took a hefty amount of your take-home pay. So, freeing up some of your income is a significant plus.

Open Lines of Credit

As the bureaus determine your credit rating, they will be on the look out for any open lines of credit you are presently using. If you have six loans that you are paying off, those are seen as open lines of credit, six of them. With consolidation, you have only one line of credit open. One open line against six gives another big boost to your credit ratings or scores.

So, if your financial situation involves more intricacies than those presented above, a student loan consolidation may not be right for you. For most it will bring up credit scores and probably lessen your financial burden. It will certainly simplify your bill paying chores. If a student loan is right for you, make the move. Your pocket book will thank you. Your good credit history will help you.

Mary Wise is a personal loan consultant who has been associated with Guaranteed Bad Credit Personal Loans and has more than thirty years of experience in finances. She has helped a lot of people to obtain Bad Credit Home Equity Loan, and many other products regardless of their credit situation. If you want to learn more about Personal Loans you can visit her at

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