Debt consolidation is taking all of the various debts you have a putting them into one debt that you then pay off.This is usually achieved by borrowing from one source that allows you to eliminate the other debts.Then you can focus on one debt with one interest rate as opposed to many.
However, moving debt, closing credit cards, opening new ones and other financial moves like this will definitely have some sort of impact on your credit score.
Consolidation loans can both help and hurt your credit score.
Opening any new loan can cause you to have a lower credit score for a while.
When using a DMP through a consolidation service you typically have to close most of your credit cards which will lower your credit.
Again, this portion of the credit score algorithm is small and shouldn't be detrimental to your credit.
No matter how you consolidate, the eventual goal should be to pay off debt which is ultimately good for your credit.
However, it will definitely fluctuate as you go so it is not a good idea to consolidate if you are planning to make a big purchase that requires an optimal credit score.
On the other hand, if you have many credit cards and you use a loan to consistently pay them off it could help.
However, even this can have a small, negative effect because there is portion of the credit calculation method that has to do with the ratio between available and used credit.
Closing a card diminishes your available credit and affects this ratio which can cause a small dip in credit.
This part of the credit score calculation is also affected by debt management plans.