A debt consolidation loan is a loan that helps you pay off all your pending debts: unpaid loans or credit card debt. Multiple debts are combined into one single debt where you get more lenient payoff terms. This debt can be paid off in EMIs through a debt consolidation loan. In the long term, if you pay your EMIs on time, your credit score will eventually increase.

When you are planning to take a loan, your lender will make a hard inquiry. A hard enquiry is made when a lender wants to check your credit report to make sure you are credit responsible. A hard inquiry will reduce your credit score by a few points. If a customer applies for multiple credit, it means that they are a high risk customer, so lending to them will be risky. So whenever you apply for credit, a hard inquiry is made. Each inquiry will bring down your score. But this credit score dip is temporary, and as you pay off your debt consolidation loan over time, your credit score will get back on track.