How Long Debt Consolidation Stays on Your Credit Report - Experian (2024)

In this article:

  • How Long Debt Consolidation Stays on Your Credit Report
  • How Does Debt Consolidation Affect Your Credit?
  • How to Minimize the Impact of Debt Consolidation

Debt consolidation is a process that involves paying off one or more existing debts with a new loan or credit card, preferably with a lower interest rate. When you open new credit, it can have a temporary negative impact on your credit score.

But if you use the process to pay down your debt on time, it can ultimately improve your credit and overall financial well-being. Here's what you need to know.

How Long Debt Consolidation Stays on Your Credit Report

The act of consolidating your debt doesn't appear on your credit report, but the new loan or credit card account you use typically will. Exactly how long that account remains on your reports will depend on the type of credit you use and how you manage your debt payoff plan.

Balance Transfer Credit Card: Up to 10 Years or Indefinitely

A balance transfer credit card is a type of card that comes with an introductory 0% annual percentage rate (APR) promotion, allowing you to pay down high-interest balances over 12 to 21 months interest-free.

If you keep the card open after you pay down your balance, the account will remain on your credit reports indefinitely. If you always pay your bill on time and close it in good standing, that positive information will stay on your reports for 10 years from the date the card was closed. However, if you missed a payment by 30 days or more, that negative mark will last for seven years from the original delinquency date, or the date the account first became past due.

Personal Loan: Up to 10 Years

A personal loan is another popular debt consolidation tool. While it won't give you a 0% APR, it does provide a fixed repayment term, which can be helpful if you've struggled to stay disciplined with your debt payoff plan. Also, if you have good or excellent credit, you may be able to secure a lower interest rate than what you're currently paying.

Unlike credit cards, there's no way to keep a personal loan account open indefinitely. But if you make all your payments on time, the account will remain on your credit reports for 10 years after it's closed. If you miss a payment or stop repaying your loan, that negative information will stay on your credit reports for seven years from the original delinquency date.

Other Debt Consolidation Options: Up to 10 Years

Depending on your situation, you may consider other ways to consolidate your debt, such as a home equity loan, home equity line of credit (HELOC) or 401(k) loan:

  • Home equity loans: A home equity loan can have repayment terms of up to 30 years, but in terms of your credit report, they work similarly to personal loans: Positive information remains on your credit reports for 10 years after account closure, while negative information stays for seven years from the original delinquency date.
  • HELOC: While HELOCs function similarly to credit cards in many ways, they generally can't be kept open indefinitely; repayment terms usually range from 10 to 30 years. In other words, the same rules apply with positive and negative account information.
  • 401(k) loan: Unlike other consolidation options, 401(k) loans don't show up on your credit reports at all because you're essentially borrowing money from yourself.

How Does Debt Consolidation Affect Your Credit?

Depending on which type of financial product you choose to consolidate your debt, the process can impact you in different ways. Here's a quick summary of the factors that come into play.

Payment History

Regardless of which option you choose—excluding 401(k) loans—making your payments on time will help improve your credit score.

If you miss a payment by 30 days or more, however, it could have a significant negative impact on your score. The longer you go without catching up on a missed payment, the more damage it'll do.

Credit Utilization Rate

With a credit card, your credit utilization rate is the percentage of available credit you're using at a given time on revolving credit such as credit cards. If you consolidate a credit card balance with a personal loan, home equity loan, HELOC or 401(k) loan, that'll drop your utilization rate on that card down to 0%, which can improve your credit—especially if your utilization was high to begin with.

If you use a balance transfer credit card, however, the impact will depend on the credit limit of the new account. If transferring the debt results in a lower utilization rate than what you had on the original card, it could improve your credit score. If it's higher, it could hurt your credit until you pay it down.

Length of Credit History

Each time you open a new credit account, it reduces the average age of all of your credit accounts, which is a factor in your credit scores. As a result, your credit score may experience a temporary dip, though it can rebound as your average age of accounts increases again. Just be careful to avoid opening loans and credit cards too often.

New Credit

Applying for credit frequently can be an indicator of risk for lenders. Also, each time you apply for credit, the lender will run a hard inquiry on your credit reports. One new inquiry won't have much of an impact on your credit score, and inquiries only affect your score for the first 12 months.

But if you apply for multiple loans or credit cards in a short period, those inquiries can have a compounding negative effect on your credit unless you're rate-shopping certain types of loans.

How to Minimize the Impact of Debt Consolidation

Using debt consolidation to improve your financial situation can also have a positive impact on your credit score over time.

But if you're not careful, certain aspects of the process could do more harm than good. Here are some tips to help you minimize the potential negative impact of debt consolidation on your credit score:

  • Keep old credit cards open. If you're consolidating credit card debt, you may be tempted to close the old accounts once the process is complete. But closing credit cards can negatively impact your credit. Unless keeping the account would be costly—for example, the card has an annual fee, or you'd be tempted to rack up more debt—avoid closing it.
  • Avoid adding more debt. After you pay off a credit card balance, avoid adding more debt that you can't afford to pay off in full each month. Otherwise, it can slow your progress toward becoming debt-free.
  • Avoid applying for too many accounts. This can help keep the negative impact of credit inquiries and new credit accounts to a minimum.
  • Always pay on time. Your payment history is the most influential factor in your credit scores, so it's crucial that you always pay your bills on time. Before you apply for a loan or credit card, make sure the new monthly payment comfortably fits in your budget and set up automatic payments or monthly reminders to pay manually.

Check Your Credit Before You Apply for Consolidation

Most of the best consolidation options require good or excellent credit to get approved or to enjoy favorable terms. So, it's a good idea to check your credit score before you apply for new credit. If your credit needs some work, you may consider other debt repayment strategies while you work on improving your credit.

How Long Debt Consolidation Stays on Your Credit Report - Experian (2024)


How Long Debt Consolidation Stays on Your Credit Report - Experian? ›

Debt consolidation itself doesn't show up on your credit reports, but any new loans or credit card accounts you open to consolidate your debt will. Most accounts will show up for 10 years after you close them, and any missed payments will show up for seven years from the date you missed the payment.

How long does debt consolidation stay on credit report? ›

How long will a debt consolidation stay on your record? A debt consolidation loan — such as a personal loan — will stay on your credit report throughout your repayment period. Additionally, any missed or late payments on your loan will stay on your credit report for up to seven years.

How long does information stay on my Experian credit report? ›

Positive entries and accounts closed in good standing persist for 10 years. Information that benefits your credit scores stays on your credit reports for as long as 10 years. This includes loans you've paid off as agreed and credit card accounts closed in good standing.

How far back does Experian credit check go? ›

Credit reference agencies (CRAs) like Experian usually hold financial information for six years. If you order a copy of your Experian Credit Report or use CreditExpert, you should see your full address history for that period. If any addresses are missing, you can add them.

How long do late payments stay on Experian credit report? ›

Once a late payment is reported to one of the credit bureaus (Experian, TransUnion or Equifax), it can stay on your credit report for up to seven years.

Will debt consolidation hurt my credit score? ›

Debt consolidation puts multiple debts into a single account to make your payments easier. Debt consolidation can lower your credit score temporarily, but your score will improve if you make payments on time. Other tools like debt management plans and bankruptcy can help you manage debt.

Does debt consolidation show on credit report? ›

Consolidating your debt can impact your credit score, but as long as you manage your debt responsibly, any negative effects will be temporary. Understanding your options and how they affect your credit score can help you determine the right steps.

How accurate are Experian credit reports? ›

Credit scores from the three main bureaus (Experian, Equifax, and TransUnion) are considered accurate. The accuracy of the scores depends on the accuracy of the information provided to them by lenders and creditors. You can check your credit report to ensure the information is accurate.

How accurate is Experian data? ›

Experian ranks #1 in accuracy for 15 marketing data attributes, including but not limited to Age, Gender, Home Owner/Renter, Geography, Education, Presence of Children, and Pet Owner. Experian consistently has the largest number of HEMs with demographic data that are 90% or more likely to be accurate.

How do I get something off my Experian credit report? ›

To dispute information in your Experian credit report, you can easily submit a dispute online:
  1. Go to the Dispute Center to start a new dispute.
  2. Choose a reason for the disputes you're submitting.
  3. Review your request before hitting submit.
  4. Upload relevant documents that confirm the inaccuracy.
May 22, 2023

Is it true that after 7 years your credit is clear? ›

Most negative items should automatically fall off your credit reports seven years from the date of your first missed payment, at which point your credit score may start rising. But if you are otherwise using credit responsibly, your score may rebound to its starting point within three months to six years.

How can I legally delete my credit history? ›

Correct information cannot be removed and stays on file for at least seven years. So, if your score is low due to accurate negative information, you'll need to repair your credit over time by making payments on time and decreasing your overall amount of debt.

Which banks use Experian? ›

Bank preferences and practices

Capital One is notorious for pulling credit from all three bureaus, while American Express and Chase largely rely on Experian for most of their credit decisions.

What is a 609 letter to remove late payments? ›

Section 609 gives consumers the right to request information related to debts listed on their credit reports. Examples of information that you may want to dispute include: Accounts opened due to identity theft. Late payments that were paid on time.

Can you have a 700 credit score with late payments? ›

It may also characterize a longer credit history with a few mistakes along the way, such as occasional late or missed payments, or a tendency toward relatively high credit usage rates. Late payments (past due 30 days) appear in the credit reports of 33% of people with FICO® Scores of 700.

What happens after 7 years of not paying debt? ›

The debt will likely fall off of your credit report after seven years. In some states, the statute of limitations could last longer, so make a note of the start date as soon as you can.

How do I get a debt settlement off my credit report? ›

Unless the information reported to the credit bureaus is incorrect, you won't be able to remove the settled account from your credit report. You can try to negotiate with the creditor, but legally the debt can stay on your credit report, regardless of payment status.

Can you still get a loan after debt consolidation? ›

It is possible to get a home loan and very possible to get a car loan, student loan or new credit card while you're on a debt management program. Nonetheless, a good nonprofit credit counseling agency would advise you to slow down and weigh the risks before acting.

Does debt consolidation affect buying a home? ›

5 As we mentioned already, getting a lower monthly payment on a personal debt consolidation loan can lower your DTI and make it easier to qualify for a mortgage. However, the opposite is also true, and a debt consolidation loan with a higher monthly payment could make qualifying more difficult.

What happens if you dont pay debt consolidation? ›

A debt consolidation loan would go into default. Again, the lender may send the debt to a collector. If you used a debt management program and don't keep up with the payments, you can get kicked off the program. However, if you call the credit counseling team in advance, they can help you make special arrangements.

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