Debt consolidation danger signs

Dear Audrey,

I'm thinking about taking out a consolidation loan because my credit card interest rates are very high. I would be using the equity of my home to do this. Is this a good idea?

Ralph S.

Dear Ralph,

Consolidating high interest credit card debts into one lower interest account can be a good way to take charge of out of control debts. Just make sure that you watch out for a few common pitfalls that can damage your credit score along the way. Be careful not to close the oldest account in your  credit history when you are moving debts as this could cause your credit score to drop. Also avoid combining debts onto a new credit account with a balance above 50% of the available limit for the same reason. Check your credit reports from TransUnion, Equifax and Experian frequently while moving these debts to make sure that everything is being properly recorded.

There are several different types of consolidation loans available. Check with your financial advisor to see if consolidation using a home equity loan is appropriate for your financial situation. If you work closely with your lender and avoid the things that can damage your credit, you should be able to easily consolidate and reduce your debts.

Best wishes,
Audrey O'Dell