Reader question on consolidating and credit scores

A reader question:

A question about debt consolidation. I want to consolidate my debts as I know that it would help me to lower the monthly payments and interest.

Recently, I read that it would affect one's credit score. Does anyone know more about this? I have a good credit score and never failed to make any payments till now. Right now I feel its very hard to make my repayments on time. That's why I am thinking of consolidating into one single payment which is much less than the sum of the existing payments - but, not if it would affect my credit score!

My response:

NOT making your repayments on time has a bigger effect on credit score than consolidating. I think we’re confusing internal lender credit score and personal credit report scoring. Internal lender credit score looks unfavourably on consolidating – that’s true, but it doesn't go back to your credit report. What impacts your credit report score is late / missed payments and too many enquiries. If your personal credit report score is good then there’s no reason for this to be dramatically changed.

Now, the caveat I have on any debt consolidation is on this article - but bottom line doing something sooner is better than doing nothing and damaging your credit worthiness.

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