Customized financing to consolidate high-interest debt or fund major purchases or expenses.
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Customized financing to consolidate high-interest debt or fund major purchases or expenses.
Debt consolidation can both help and hurt your credit score, but fortunately, the overall effect is mostly within your control. If you successfully pay off your debt and don’t accumulate excessive balances in the future, the impact should be positive. Conversely, your score will go down if you practice undisciplined spending habits or miss payments.
Knowledge is power when it comes to protecting your credit. It’s important to understand the relationship between debt consolidation and credit score, so you can make moves today that help you regain control of your finances.
Debt consolidation is when you combine multiple unsecured debts into a single loan, usually at a lower interest rate. When used to consolidate credit card debt, for example, you might put several card balances with varying annual percentage rates (APRs) into a single loan with a fixed monthly payment.
To pay off debt, you have the following debt consolidation options:
Generally speaking, debt consolidation is a good idea if your new interest rates are lower than those on your existing accounts so you can save more money over time; a good or excellent credit score helps with this. Regardless of the method you choose, consolidating debt may change your credit score.
Here are a few ways you may improve your credit score after debt consolidation:
While consolidating debt may have long-term benefits, debt consolidation can hurt your credit score:
When you understand the impact of debt consolidation and its potential effect on your credit score, you can take proactive measures to safeguard it.
FYI: BHG Financial offers debt consolidation loans with repayment terms up to 10 years,1,2 helping you keep monthly payments low, so you can stay within budget.
How long will debt consolidation affect my credit?
Debt consolidation loans trigger a hard credit inquiry, which when performed, causes your score to dip temporarily. However, building a history of on-time payments using the new loan could help improve your score over time.
Is debt consolidation or debt settlement better for my credit?
Debt consolidation usually has a better, more positive long-term impact on your credit, as long as you keep up with the payments and don’t close your accounts. Debt settlement—negotiating with creditors to pay less than what you owe—can cause significant damage to your score due to withholding payments and the impact of settlement on your credit report. Settled accounts will remain on your report for seven years.
Can consolidating debt lower my credit utilization ratio?
If you consolidate your debt through a loan, you will lower your utilization ratio because you will have paid off your high-balance cards with funds from the loan. For this to have a positive impact on your score, you’ll need to keep your utilization ratio low and avoid accumulating excessive high-interest debt in the future.
Will applying for debt consolidation trigger a hard credit inquiry?
Some lenders perform a hard credit inquiry during the application process, while others allow you to prequalify using a soft credit inquiry. BHG Financial doesn’t perform a hard credit pull for personal loan applications until the funding stage of the loan process. This means that submitting an application will have no impact on your credit score.3
At BHG Financial, we believe financing should fit seamlessly into your life and goals. That’s why we offer personal loans tailored to your needs, with amounts up to $250,0001 and flexible terms of up to 10 years.1,2 Consolidate your high-interest debt with a BHG loan designed to help you move forward confidently.
Plus, you’ll enjoy dedicated, U.S.-based concierge service that works around your schedule—because your time is valuable. Ready to see what’s possible? Use our quick and easy payment estimator to get your personalized loan estimate in just seconds.
Not all solutions, loan amounts, rates or terms are available in all states.
1 Terms subject to credit approval upon completion of an application. Loan sizes, interest rates, and loan terms vary based on the applicant's credit profile.
2 Personal Loan Repayment Example: A $59,755 personal loan with a 7-year term and an APR of 17.2% would require 84 monthly payments of $1,228.
3 There is no impact on your credit for applying. For personal loans, a complete credit history, which will appear as an inquiry on your credit report, will be performed upon acceptance and funding of the loan and may impact your credit.
Annual percentage rates (APRs) for BHG Financial personal loans range from 11.96% to 27.87%, with terms from 3 to 10 years.
Consumer loans funded by Pinnacle Bank, a Tennessee bank, or County Bank. Equal Housing Lenders.
No application fees, commitment, or impact on personal credit to estimate your payment.
For California Residents: BHG Financial loans made or arranged pursuant to a California Financing Law license - Number 603G493.
* The savings estimate assumes a fixed-monthly payment is made on the variable APR credit card and no additional draws on the line are made for the 7-year period.
** BHG monthly payment based on BHG’s minimum available APR for a 7-year term, which is 12.44% as of 4/01/25 and includes an origination fee. Your actual loan size, loan term, and monthly payment amount may vary based on your individual credit profile and other information provided in your loan application. Terms subject to credit approval.