Can I Get a Credit Card With Debt Consolidation?

Credit card issuers base lending on information found on your credit report, including the total amount you owe. As consolidation does not eliminate debt, it merely transfers it, your ability to take on more credit doesn't change when you consolidate and issuing new credit is at the discretion of the lender. Obtaining a credit card with debt consolidation depends on the issuer, your financial history and the type of consolidation done.

Facts

Your credit history determines interest rates and credit card types available. Creditors tend to increase interest rates, deny credit or offer secured credit cards to high-risk consumers. Much like a debit card, charges on a secured credit card are limited to the funds a consumer has in an account linked to the card. As your financial situation improves, your ability to negotiate better terms with a credit card issuer or apply for new credit increases.

Debt Management Plans

If you consolidate debt through a debt management or credit counseling plan through an outside agency your borrowing may be limited. With debt plans, an agency negotiates with your creditors to lower debt and work out an equitable repayment plan. Current creditors may restrict new charges and the debt management plan may prohibit you from applying for new credit until old debts are paid as part of the contract terms. Additionally, your credit report may reflect that you are enrolled in a debt program.

Your Credit Score

The amount of debt you have compared to available credit determines 30 percent of your credit score and credit card companies look for low balances across the board, including overall debt. Transferring a balance from a credit card with a high limit and then closing the card may lower your credit score by changing your debt to credit utilization ratio. Credit inquiries appear on your credit report each time you apply for new credit. Numerous credit inquiries in a short period and altering your debt to credit ratio may hinder your chances of obtaining a credit card.

Concerns

While consolidating debt to ease current hardships and pay off debt more quickly benefits your future lending option, obtaining new credit on top of the old debt worsens your financial situation when spending habits remain the same. Consolidating debt with a second loan and charging up the recently paid account deters credit card companies from offering credit to consumers.