Consolidating all your debt into one loan can be helpful for you to pay off all your debt slowly in one EMI plan. But this can also decrease your credit score as taking up credit will raise a hard inquiry, which will bring down your score by a few points. Having a new credit account is considered as a new risk, and this causes a temporary dip in your credit score.

There are also positive effects on your credit score. Availing a loan will lower your credit utilization ratio as it would have increased your available credit. A low credit utilization ratio will have a positive impact on your score. Over the long term, your credit score will increase if you repay your consolidation loan on time. But if you default on your loans your credit score will definitely drop.