Debt consolidation can be great for boosting credit, but how you tackle it can also lower your score. Here are some things to think about before consolidating.

Credit Inquiries

A credit inquiry is done every time you apply for a new line of credit, be it a car loan or a credit card. this impacts your credit score. While the hit only lasts a year, you might want to consider that before you take out a card with a 0% APR balance transfer credit card or a personal loan.

Credit Utilization Ratio

The amount of available credit, also known as our credit utilization ratio impacts your credit score. Moving multiple balances onto one card (to then pay that card down) can hurt your credit utilization ratio.  As long as you pay the card down aggressively, that effect will be temporary.

Closing Accounts

Keeping accounts open after you pay them off with cause a smaller dip than if you decide to close them. Sometimes a credit counseling service will require you to close them. While that will lower your score, it will be in your best interest to close them.  .

Have a Plan and Follow Through

Make a plan for consolidating and then follow through with it. If you take out a loan, make sure you can pay it on time. If you decide to do a credit balance transfer then make sure you can pay it down before the introductory period ends.

Source: NerdWallet, How Credit Card Debt Consolidation Can Hurt Your Good Credit, December 22, 2014