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A good credit score is probably one of the most important numbers in a person’s life, especially when it comes to managing his finances. A credit score can sometimes become a determining factor in a person’s loan application.

For instance, if you are planning to buy a new house, or a new car, you will find yourself checking your credit score. While you already have a general idea of how the credit score works, you may be unaware that there are some things that you may have already done that had a negative effect on your credit score.

For instance, closing your old credit card can possibly affect your credit score negatively. These old cards have probably been with you for more that five years and with that these cards probably have the most information about your credit history. By canceling your old card, you are possibly removing years of good credit history, which could end with you having a lower credit score.

Another example when your credit score could be negatively affected is when you shop around for low interest rates for a loan. For instance, if are looking to buy a house and are “rate shopping.” In this case, the credit bureau will treat several credit checks as one, as long as these checks were done in, say 45 days (for a FICO score). In order to prevent a negative impact on your credit score because of your “rate shopping,” it would be best if you can limit it to 2 or 3 weeks, just to minimize possible inaccuracies.

A further advantage is that you will be able to see an end to your debts. When you are paying off multiple credit cards and loans, the temptation can be to make minimum repayments on your cards, and even if you stop using your cards it can take a great many years before you will have paid off your debt and the amount of money that you will have paid in interest payments will be considerable.

Unlike some other ways of getting out of debt, a debt consolidation loan will not affect your credit rating adversely. In fact, if you are finding that you are missing loan and credit card repayments, it is a good way to preserve the credit rating that you already have and to improve it over time my maintaining your reduced repayments.

Debt consolidation loans are not exclusively for property owners, but if you do own a property then you can use a debt consolidation loan to free up equity that is tied up in your property. Your loan will be secured on your property and with this arrangement it is possible to get a loan at a much reduced interest rate than would be available otherwise. Naturally if you do this you must be completely secure in your ability to maintain your payments or you could put yourself in danger of losing your home.

Although people who do not own a property may still access a debt consolidation loan, nowadays it is more difficult than it used to be, and some people in certain circumstances might find that it is not available and some other form of debt management is needed.