Understanding Credit Consolidation
Credit consolidation is a strategy where individuals take out a new loan to pay off an existing one. While this can be beneficial if costs and conditions are compared, it poses risks if not properly planned. In Mexico, 65.1% of individuals with debts consider their level of indebtedness to be moderate to excessive, and around 27% face delays in payments, according to the National Financial Health Survey (ENSAFI) by INEGI.
Who is Wolfgang Erhardt?
Wolfgang Erhardt, spokesperson for the Credit Bureau, advises on evaluating financing conditions, total cost, and real benefits before consolidating credits to avoid falling into a vicious cycle. He emphasizes calculating the final amount to be paid and comparing it with the current credit, as well as seeking institutions with lower interest rates if you have a good credit score and debt capacity.
Impact on Credit History
Contrary to popular belief, consolidating a credit with another does not negatively affect your credit history if the new financing is paid on time. However, experts advise:
- Avoid minimum payments on credit cards to prevent accumulating interest.
- For salary or personal loans, there should be no delays.
- Frequently requesting new credits can trigger alerts in financial institutions.
Building Healthy Credit Habits
The real challenge lies not just in obtaining new financing but in establishing habits that prevent recurring over-indebtedness. It’s crucial to understand the implications of credit consolidation and make informed decisions based on your financial situation.
Key Questions and Answers
- What is credit consolidation? It’s the process of taking out a new loan to pay off an existing one, which can be beneficial if costs and conditions are compared.
- How does credit consolidation affect my credit history? If managed properly, it doesn’t negatively impact your credit history. However, consistently seeking new credits can raise red flags for financial institutions.
- What should I consider before consolidating my credit? Evaluate financing conditions, total cost, and real benefits. Ensure you can manage the new loan, especially if it has a higher interest rate.
- How can I maintain a healthy credit history? Avoid minimum payments on credit cards, ensure timely payments for all loans, and limit the frequency of seeking new credits.
Relevance of Wolfgang Erhardt’s Advice
Wolfgang Erhardt’s advice is particularly relevant given the high percentage of Mexicans grappling with moderate to excessive debt. His suggestions on comparing financing terms and seeking lower interest rates can help individuals make more informed decisions about credit consolidation.
