Debt consolidation essentially means taking out a loan of a sufficient amount to cover all your other debts. This loan is then used to pay off those debts and you are left with one monthly repayment – just the debt consolidation loan itself. But how does debt consolidation affect your long term credit record?

Well the first thing to consider is the fact that if you already have a poor credit record, you may find that you struggle to obtain a debt consolidation loan in the first place, particularly if you are not a homeowner.

But if you are able to and decide to opt for debt consolidation, there needn’t necessarily be any detrimental effect on your credit record. It will, of course, show up on your record that you have applied for and taken out a debt consolidation loan. But it will also show that you have paid off your other debts using this. Providing you then continue to make your monthly repayments against the loan on time, it may even have a positive impact over time.

However, as with any form of credit, regularly missed payments will have a detrimental impact on your credit score.