As more and more people are starting to drown in debt, they are seeking solutions to prevent the growing cost of borrowing and possible credit issues. Debt consolidation loans are the most popular solutions on the lending market today, serviced to consumers in need by consolidation agencies. In fact, the effectiveness of these kind of loans in fighting for a debt-free future is truly unparalleled. The way it works is that it absorbs all unsecured debts of an individual, resulting in one active loan account with lower interest and more affordable monthly payment. However, there has been a raising concern of negative impact a debt consolidation loan may have on the credit record of a consumer. Now, how good the debt consolidation loans are?Debt Consolidation Loans Initially Lower The Credit ScoresDebt consolidation loans are no different from other loans once it comes to application and underwriting process. A credit report of an applicant is pulled by a debt settlement agency, or even multiple agencies, causing the number of credit inquiries to grow. Credit inquiries generally attribute to about 10% of a credit score composition, and applying for any loans would result in a temporary credit score drop just due to the increased number of inquiries on the credit report. Credit inquiries stay on credit record for two years, and have the most impact on the credit score for the first six months.Once a debt consolidation loan is granted, a new account would appear on the credit report of the borrower, causing another temporary drop in the credit score. As the age of credit accounts affects the credit score calculation, a new credit account would decrease the average age of all loans of an individual, causing the credit score to go down slightly. However, it does happen with all new credit accounts whether it is a credit card, an auto loan, or a debt consolidation loan. Therefore, consolidating debts with the help of a debt consolidation loan does have a slight negative impact on the credit rating of the borrower. However, such impact is temporary in nature, usually not lasting over a year.Debt Consolidation Loans Raise The Credit Scores In The Long RunDebt consolidation loans, however, cause one more serious effect on the credit record of the borrower. As they absorb all the balances on revolving credit accounts of the borrower, which account for nearly a third of the credit score calculation, once the credit card balances are updated with a credit-reporting agency, the credit score would inevitably go up. Therefore, one should not worry about temporary drops in the credit score caused by credit inquiries and showing a new account on the credit report. Besides a positive long-term effect on the credit quality of a borrower, they have many other advantages, as they lower your monthly payments, decrease the borrowing cost, and allow for clear and easy to understand debt management.Debt consolidation loans may be easily found online. There are trustworthy agencies that offer great deals that you may avail from. Such agencies are able to custom-tailor a loan for you based on your individual situation, and offer far better terms compared to what you currently have on your credit card accounts.