How long does the credit score dip last?

The hard inquiry and the brand-new account are both small, short-lived effects — new credit is 10% of a FICO score. The improvement from lower utilisation, which is 30%, typically arrives within a statement cycle or two and outweighs the dip.

Does consolidating close my credit cards?

Paying a card off does not close it, and you generally should not close it. Closing removes that limit from your available credit, which pushes utilisation up and can undo the main benefit of consolidating.

Is a balance transfer the same as consolidation?

Similar in effect, different in mechanics. A balance transfer moves card debt to another card, often at a promotional rate with a fee. A consolidation loan replaces the debts with an instalment loan at a fixed rate and term.

Does consolidation reduce what I owe?

No. It changes the rate, the term, and the number of payments. Only settlement or repayment reduces the balance, and settlement has its own consequences.

Can Debt Consolidation Hurt Your Credit Score?

Short answer: a small dip first, a bigger improvement after — provided you don’t do the three things that turn consolidation into a trap.

The dip is mechanical and brief. The improvement comes from the same place most quick score gains come from: your balances falling relative to your limits. The trap is behavioural, and it catches a lot of people.

Why the score dips at first

Two effects, both small.

The hard inquiry. Applying for a consolidation loan creates one. New credit is 10% of a FICO score, and a single inquiry is a minor part of that.

The new account. A brand-new loan has no history and drags down the average age of your accounts. Length of credit history is 15% of the score, and this effect fades as the account ages.

Together these are modest and temporary. If your score drops noticeably and stays down after consolidating, the cause is almost certainly in the next section rather than here.

Why it usually helps more

The gain comes from amounts owed, which is 30% of the score, and specifically from credit utilisation — how much of your available card limits you’re using.

Move £8,000 of card balances onto an instalment loan and your cards read as paid off. Your utilisation collapses, and because the reported figure is a snapshot rather than a history, that improvement can appear within a statement cycle or two. Instalment loan balances are also generally treated more gently by scoring models than revolving card balances.

There’s a second, slower benefit: one fixed payment on one date is easier to never miss than four payments on four dates. Payment history is 35% of the score (the largest category), and simplifying it is worth more over a year than the initial dip cost.

The three ways it goes wrong

1. You run the cards back up. It’s the most common failure of the three, by a wide margin. The cards now have zero balances and full limits, and nothing about the consolidation changed the spending that filled them. Six months later there’s a loan and card debt, utilisation is back, and the total owed is higher than before.

The fix is deliberate and slightly inconvenient: take the cards out of your phone wallet, remove them from saved payment details, and keep one for genuine emergencies only.

2. You close the old cards. Closing feels responsible and raises your utilisation, because you’ve removed available credit while keeping whatever balance remains. It also eventually shortens your credit history. Stop using them; don’t close them.

3. You stretch the term to lower the payment. A lower monthly payment across a longer term can mean paying more total interest than you would have — even at a lower rate. Consolidation should be judged on total cost, not on the monthly figure the salesperson leads with. Running the numbers on the loan itself is the way to check.

When consolidation is genuinely worth it

Three conditions, all of them:

The new rate is meaningfully lower than the weighted average of what you’re paying now. With cards averaging 20.94% in May 2026, that bar is often clearable — but check the fees, because an arrangement fee can erase a modest rate saving.
The term is not much longer than you’d have taken to clear the debts anyway.
You can stop using the cleared accounts. If you’re honest that you can’t, consolidation will make things worse and the money is better spent on the underlying pattern.

When it isn’t

If the debts are small enough to clear within a year or so under your own plan, consolidation adds paperwork, fees and a hard inquiry for very little gain. Just attack them directly.

If the rates are already low, there’s nothing to improve.

And if you can’t afford the minimums today, a consolidation loan may not be approved at a rate that helps. That situation calls for talking to the lenders before defaulting and getting free advice from a nonprofit credit counselling service — not for a more expensive loan.

What to check before signing

The APR including fees, the total amount repayable, whether there’s a penalty for repaying early, and whether the lender pays your creditors directly or hands you the money. The last one matters more than it sounds: money that lands in your current account has a way of not reaching the cards.

Get those three behaviours right and consolidation is close to a free move for your score. What actually increases a credit score covers the mechanics in full, and the credit score guide has everything else worth knowing.