Does debt consolidation hurt your credit score?

The credit impact timeline of debt consolidation:

Month 1-3: Hard inquiry (-3-8 points). New account opens (reduces average age, -5-15 points). Existing credit-card balances paid off (reduces revolving utilization, which can add 20-50+ points if utilization was high). Net effect in month 1 is often mildly positive if utilization drops substantially.

Month 3-12: On-time installment payments build payment history (+). Average account age recovers as the new loan ages (+). If you don't run up credit card balances again, utilization remains low (big +).

Month 12+: The sustained on-time payment history and lower utilization dominate. Most borrowers who consolidate and don't re-run balances see net credit improvement at 12+ months.

The risk to credit score: Re-accumulating credit card debt after consolidation creates a worse situation: now you have the personal loan payment AND growing credit card balances, with higher overall DTI. This scenario often leads to score deterioration.

Closing paid-off credit cards: Don't close paid-off credit cards after consolidation. Keeping them open (with zero balance) maintains your available credit, keeps utilization low, and preserves average account age. Closing them hurts all three factors.