Does Consolidation Hurt Your Credit? A Month-by-Month View
Short answer: a small dip, then a climb, as long as you leave the paid-off cards open and don't refill them.
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Key takeaways
- Month 0: the hard inquiry and new account typically cost single digits to low teens of points.
- Month 1–2: card utilization drops to near zero, which usually outweighs the inquiry dip.
- Closing the paid-off cards or refilling them reverses the gain.
Month 0: application
The hard inquiry typically costs a few points. A new account with no history slightly lowers your average account age. Expect a dip in the single digits to low teens.
Month 1–2: funding and payoff
The loan pays off your cards. Revolving utilization, often the second-largest scoring factor, drops from (say) 85% to near zero. Installment debt isn't weighted the same way. For most people this swing is larger than the inquiry dip, and the score moves up within one or two reporting cycles.
Month 3–12: payment history
Each on-time loan payment adds to the factor that matters most. Your mix now includes an installment account, which helps modestly.
85% → 4%
Illustrative utilization before and after consolidating $12,750 of card balances on $15,000 in limits, with one card kept in light use. This is the swing that lifts the score.
What reverses the gain
- Closing the paid-off cards. That removes their limits from your utilization math and shortens your history.
- Running balances back up on the open cards. Now you have the loan and the cards.
- Missing a loan payment. One 30-day late undoes a year of progress.
The entire strategy
Keep the cards open, keep them near zero, pay the loan on autopay.
