If this happens, this person could quickly owe twice as much money as before. Debt consolidation hurts your credit score when you delay or reduce payments to creditors rather than retire old obligations immediately.
Use the proceeds to pay down revolving balances without closing any credit cards. The reason is that your revolving utilization ratio does not improve. However, if doing so prevents further spending it is much better in the long term. Borrowers subject to wage garnishment rarely qualify for a loan.
This will also immediately improve your credit rating after the old lender reports the paid in full status.
However, this option works only if the new lender agrees to fund the loan.
Settlement programs and debt management plans can also hurt qualifications – but could result in longer-lasting relief.
Choose the option that optimizes your financing needs at the right time.