Any declaration of bankruptcy stays on your credit report for at least seven years, while a Chapter 13 bankruptcy stays on for ten years. That will mess up your credit rating a lot more than getting a debt consolidation loan. However, one thing to keep in mind when choosing a debt management service is to ignore anyone who says they can erase any bankruptcies from a credit score. That’s illegal.Good FortuneFortunately, there are far more ethical debt management services than there are unethical ones. Good companies also offer credit counseling as will as a debt consolidation loan. Grab a hold of those services because they will teach you valuable life skills to keep you from getting back into debt.But how does a debt consolidation loan affect your credit rating? Initially, it may have a bad effect. But your chances of paying off this type of loan are much greater than not doing anything at all. Once the loan is paid off, then your credit rating will go up, because you have proven that you were reliable enough to make the payments.Think Long Term GoalsDebt management services are required by law to state that they have given you a loan. Besides, your creditors will know, anyway, because the service will pay off the loan rather than you. On your credit report, these loans may be called “third party loans” and banks generally are wary of anyone who just received such a loan.But if you can make your payments on time and do not get in trouble with any other creditor, then you really have nothing to worry about. This is especially good for people in credit card debt. A consolidation loan will, over time, cost you a lot less money than paying the credit card company directly because you will not have to pay the outrageous interest rates they charge.In conclusion, a third party loan will cause a temporary dip in your credit rating – but not as much as bankruptcy will. Also, if you can make your payments on time, then your credit rating will rise again.
