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How To Consolidate Credit Card Debt Without Hurting Your Credit Score

Jessica Merritt's image
Jessica Merritt
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Jessica Merritt

Editor & Content Contributor

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Countries Visited: 4U.S. States Visited: 23

A long-time points and miles student, Jessica is the former Personal Finance Managing Editor at U.S. News and World Report and is passionate about helping consumers fund their travels for as little ca...
Edited by: Keri Stooksbury
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Keri Stooksbury


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With years of experience in corporate marketing and as the executive director of the American Chamber of Commerce in Qatar, Keri is now editor-in-chief at UP, overseeing daily content operations and r...

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Carrying credit card debt can get in the way of your financial goals while dragging down your credit score. The good news is that as you reduce your credit card debt, your credit score should improve, though some debt consolidation methods are more credit score-friendly than others.

Credit card debt was the most widely held type of debt in 2022, and the average household has about $10,000 in credit card debt.¹ A good credit score is key to applying for a mortgage, getting top-notch credit cards, and other financial opportunities that seem out of reach with credit card debt.

Read on to learn the best ways to consolidate credit card debt without hurting your credit score.

How Credit Card Debt Affects Your Credit

Credit card debt can negatively affect your credit in multiple ways. Late or missed payments and high revolving balances are major culprits. And if credit card debt goes into collections, derogatory accounts can further erode your credit rating.

Credit card debt can accumulate quickly due to high interest rates. If you’re overspending and making late payments, it’s easy to get in over your head with charges, fees, and interest and face credit card balances you can’t afford to pay off. That can quickly drag down your credit rating as you make late payments, carry high balances, or your accounts spiral into collections.

Payment History

You may struggle to make even minimum payments on time if you face high balances. That can result in late or missed payments, which can negatively affect your credit score. Payment history is the most important factor for your credit, making up 35% of your FICO credit score and 41% of your VantageScore.

Amounts Owed

Carrying credit card balances month to month can negatively affect your credit score. The second most important credit score factor is your credit utilization, which is how much of your available credit you use when your credit card statement closes. Amounts owed/credit utilization accounts for 30% of your FICO score and 20% of your VantageScore. Generally, your credit score may be negatively affected if you use more than 30% of your credit limit.

Derogatory Marks

When credit card debt gets out of control, and you’re unable to make payments for multiple months, your credit card accounts may go into collections. At that point, you’ll have derogatory marks on your credit report — and those negative marks can stay on your credit report for up to 7 years from the date of first delinquency.

Clearly, credit card debt is bad news for your credit score. But debt consolidation can help.

Hot Tip:

According to an Upgraded Points survey, Americans are willing to sacrifice a lot to get out of debt. 70% of Americans would give up travel for 2 years, and over a third would work every day for the next year to be debt-free. But at the same time, about 1 in 5 only pay the minimum amount required on their credit cards each month — which is not the best way to get out of credit card debt.

Consolidating Credit Card Debt

Credit card debt consolidation combines multiple credit card balances into a single payment. Ideally, you can reduce or eliminate revolving interest charges when you consolidate credit card debt, which can help you pay off your debt faster.

Statement Bill
Consistent repayment on credit card debt consolidation can get you out of debt and on the right track. Image Credit: Antonio Guillem via Shutterstock

Follow these steps to get out of credit card debt:

  1. Assess your current financial state.
  2. Reevaluate your spending and find ways to save.
  3. Create a budget.
  4. Choose a debt consolidation method.
  5. Get help if needed.

Debt consolidation loans and 0% balance transfer credit cards are the best ways to consolidate credit card debt without hurting your credit score. Still, multiple methods exist to consolidate debt, including accelerating debt repayments or working with a credit counselor to develop a debt management plan.

In general, consolidating credit card debt will help your credit score. Any time you make on-time payments and reduce your credit card balances, you should improve your credit report’s payment history and amounts owed factors, which can boost your credit score.

Let’s look more into some of your credit score-friendly options for consolidating credit card debt.

Debt Repayment

Before you get a loan or a new credit card to manage your credit card debt, do the math to figure out how much you owe and how much room you have in your budget to devote to debt payments.

If you can afford to pay more on your credit cards and clear your balances within 6 months, it’s best to do that rather than get a balance transfer card or loan. You can contact your creditors and negotiate lower interest rates to help your payments stretch further.

Sticking to a debt repayment plan can only help your credit score. When you make on-time payments, you’ll improve your payment history on your credit report. And chipping away at your credit card balances improves your credit utilization factor.

But if you need more time to pay off credit card debt, it makes sense to consider a debt consolidation loan or balance transfer card, which can ultimately improve your credit score.

Debt Consolidation Loans

A debt consolidation loan allows you to take out a personal loan with a fixed repayment schedule. You’ll generally get a lower interest rate than you would with your credit cards, and you’ll have a single predictable monthly payment. That can make it easier to plan payments and reduce your overall interest costs.

You can generally get a debt consolidation loan for a 2- to 7-year term. This is a good option if you need to stretch out your payments over years to decrease your monthly payment. It could help if you’re struggling to make payments and need a more affordable monthly payment.

Using a debt consolidation loan is generally a good move for your credit score. It adds an installment loan to your credit report, which can be helpful if you need to diversify the credit types on your credit history. Credit mix counts for 10% of your FICO credit score. 

A debt consolidation loan can also significantly help your credit utilization ratio. Installment loans aren’t credit cards and don’t count toward your credit utilization ratio. Moving credit card balances to a debt consolidation loan and dropping a credit card’s utilization to 0% can be a good move for your credit utilization ratio.

You can improve or maintain a good payment history as you make on-time payments on your debt consolidation loan.

Balance Transfer Cards

Another credit card debt consolidation method that can help improve your credit score is using a balance transfer card. With a balance transfer card, you’ll move balances from credit cards that charge interest to a new card or cards that have a 0% introductory rate on balance transfers.

During the promotional 0% period, you can pay off or pay down your credit card balance interest-free. That interest savings can make each payment go further than if you’d have to pay interest on it, helping you speed up your ability to reduce or eliminate credit card balances.

The key to using a balance transfer card to consolidate credit card debt is calculating how much you need to pay each month during the promotional period so you can pay off the balance before interest applies. 

Keep in mind that using a balance transfer card can temporarily lower your credit rating before it gets better. The hard credit inquiry from applying for a new account can ding your credit. Adding a hefty balance to your new credit card could put you over a 30% credit utilization rate, which can lower your credit score.

The long-term benefit of using a balance transfer card is still worth it.

The good news is these credit score dings should be temporary as long as you continue to pay down your credit card balance on your new balance transfer card. The temporary credit score damage is well worth the long-term benefit to your credit score when you pay off credit card debt.

When you use a balance transfer card to pay off credit card debt, you can benefit from adding on-time payments to your credit history while lowering your credit utilization as you dutifully pay down and hopefully eliminate your credit card balance. 

Bottom Line:

A balance transfer credit card can give you up to 21 months to pay off your credit balance. See our recommendations for the best personal credit cards for 0% APR balance transfers.

Debt Management Plan

Another way to pay off credit card debt is with a debt management plan. You can use a debt management plan with a nonprofit credit counseling agency to negotiate with your creditors — usually to get reduced interest rates and fees — and commit to a repayment plan. The credit counseling agency can also walk you through cutting costs and budgeting so you can afford to pay down your credit card debt.

A debt management plan can be a great way to consolidate credit card debt with the guidance and support of a professional counselor. And as you pay down your credit card balances and make on-time payments, you can improve your credit score.

Hot Tip:

Read our guide to learn how debt forgiveness works, why it’s not a great option for getting out of debt, and why it won’t improve your credit score.

Don’t confuse a debt management plan with debt settlement — these are completely different approaches. 

Debt settlement can severely hurt your credit score. Often, debt settlement companies ask you to stop making payments on your credit cards, so credit card companies are more likely to negotiate for a lower settlement amount. But in the meantime, your credit score takes a huge hit from missed payments, high credit utilization, and collection actions. You might walk away with less debt, but debt settlement will leave your credit score in shambles.

You can avoid debt settlement companies by only working with a nonprofit credit counselor affiliated with the National Foundation for Credit Counseling. And walk away if anyone advises you to stop paying your credit card bills or guarantees that your creditors will forgive your debts — a sure sign of a scam.

Hot Tip:

You have additional options for consolidating credit card debt, including a home equity loan, retirement account loan, or bankruptcy. Still, these aren’t as strong as a debt consolidation loan, balance transfer card, or debt management plan.

How Debt Consolidation Affects Your Credit Score

Debt consolidation can positively and negatively affect your credit score, though following through with debt consolidation largely has a positive effect on your credit. Still, you may see temporary negative effects as you open new accounts. You may also run into pitfalls, like not keeping up with payments, that can lower your credit score.

Person holding a smartphone with good credit score meter on the screen
If you stick to the plan, debt consolidation should improve your credit score. Image Credit: Backcountry Media via Adobe Stock

How Debt Consolidation Helps Your Credit Score

Paying off debt is great for your credit score as you make on-time payments and lower your credit card balances. That can help your payment history and credit utilization factors, the 2 most important factors for your credit score.

Additionally, a debt consolidation loan could improve your credit mix factor by adding an installment loan to your credit history.

How Debt Consolidation Hurts Your Credit Score

If you need new accounts — like a debt consolidation personal loan or balance transfer card — to consolidate debt, you may see a temporary ding on your credit score due to the hard credit inquiry. A new account can also bring down your average account age. These factors are minor, and the effects shouldn’t be long-term. Also, the positive impact of on-time payments and lower credit utilization should outweigh these negatives. 

Debt Consolidation Credit Pitfalls To Avoid

While debt consolidation should positively affect your credit score, that’s assuming it all goes to plan: you make debt consolidation payments on time and lower your balances over time. What if that doesn’t happen? 

These are some of the debt consolidation pitfalls to avoid that can derail your plans to become debt-free and negatively affect your credit score:

  • Accumulating more debt
  • Not budgeting a manageable payment
  • Missing payments
  • Not addressing overspending
  • Not planning for emergencies
  • Not getting professional help

Tips for Improving Your Credit Score During Debt Consolidation

Follow these tips to support credit improvement as you consolidate credit card debt:

  • Make consistent on-time payments
  • Try to keep your credit utilization — how much of your credit limit you use — below 30%
  • Keep old credit cards open even after you clear the balance
  • Avoid opening more new lines of credit
  • Monitor your credit report for inaccuracies
  • Reduce high-interest debts
  • Follow a budget and debt repayment plan

Final Thoughts

Credit card debt can erode your credit score and financial well-being, but debt consolidation is a great way to improve your finances and credit score simultaneously. While there are multiple ways to consolidate credit card debt, disciplined repayment is the best way to become debt-free while improving your credit score. You may face temporary credit score challenges as you consolidate debt, but managing debt is an excellent way to improve your credit score in the long run. Read our guide on how to consolidate debt with bad credit to find out more.

Frequently Asked Questions

How can I consolidate my credit card debt without hurting my credit?

You can consolidate your credit card debt without hurting your credit by making consistent on-time payments and lowering your credit utilization. Good ways to do that are using a balance transfer credit card or getting a debt consolidation loan.

Does consolidating credit cards hurt your credit?

Credit card debt consolidation can temporarily hurt your credit if you add new accounts such as a debt consolidation loan or balance transfer card. However, debt consolidation should have a positive long-term effect on your credit score as you pay down your credit card balances and make on-time payments.

Will I lose my credit cards if I consolidate my debt?

You don’t have to close your credit cards when you consolidate credit card debt. In fact, it’s best to leave old credit card account open, as that helps you maintain a longer credit history and brings up your average age of accounts. But you should avoid the temptation to run up balances again on your credit cards, as this can push you further into debt as you make debt consolidation payments.

Is it better to settle a debt or pay in full?

Paying a debt in full is always preferable from a credit score perspective. Settled debts can have a negative effect on your credit score for up to 7 years from the date of first delinquency. You may also have to pay taxes on settled debt.

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About Jessica Merritt

A long-time points and miles student, Jessica is the former Personal Finance Managing Editor at U.S. News and World Report and is passionate about helping consumers fund their travels for as little cash as possible.

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