#3: Will Debt Consolidation Affect Your Credit Score?

The short answer to this question is, "Yes, it will affect your credit score." But not necessarily in a negative way.

A debt consolidation loan is generally not counted in your FICO score unless you don't follow through and make your payments on time.

If you consolidate your debts through a debt consolidation company, there may be "notes" on your credit report that you are in such a program, but this shouldn't negatively impact your credit and you may not even see it reflected in your actual score. (If you are looking for ways to improve your credit score, don't miss 7 Steps to Boost Your Credit Score.)

However, once you agree to a debt consolidation plan, you'll have to give up your credit cards and you won't be able to obtain new credit until all of your existing debts have been paid off.

Next: #4: How Debt Consolidation Works.