Worried debt consolidation will hurt your credit in South Africa? Learn how it impacts your credit score, card use, and long-term financial health.
30 March 2026 · Fiona Zerbst
If you’re finding it difficult to keep up with multiple credit repayments, you may be considering debt consolidation to take back control and build a healthier financial future.
Before committing to any solution, it’s important to understand that debt consolidation in South Africa doesn’t mean just one thing. There are different ways to consolidate debt, and the option you choose can have specific implications for your credit score.
In this guide, we explain the two main approaches to debt consolidation – taking out a consolidation loan, and entering debt counselling – and how each can affect your credit profile in the short and long term.
Tip: It pays to check your credit health regularly to see how your financial habits affect your credit score.
Debt consolidation is the process of combining multiple debt obligations into a single, more manageable repayment. The goal is to simplify your finances, reduce the risk of missed payments, and ideally lower the overall cost of your debt.
In South Africa, there are two main ways to consolidate debt:
Both approaches aim to reduce financial pressure, but they work very differently and can affect your credit score in specific ways.
A debt consolidation loan is a type of loan that combines multiple existing debts into a single new loan with one monthly repayment.
Benefits include:
A debt consolidation loan is subject to the same affordability checks and consumer protections as any other credit agreement under the National Credit Act.
Debt consolidation doesn’t erase your debt – but it does reorganise it and make it easier to manage.
Debt counselling is a formal, legal process governed by the NCA, designed for overindebted consumers – those unable to meet their credit obligations on time.
When you enter debt counselling, a registered debt counsellor assesses your finances and negotiates reduced repayment terms with your creditors.
Under the NCA, the restructured repayment plan can be made binding through:
Paul Slot, former president of the Debt Counsellors Association of South Africa, says that, similar to other loans, a debt consolidation loan will trigger a hard enquiry on your credit report.
“This can decrease your credit score by a few points for a few months. However, if payments towards your new loan are made on time, your credit score will automatically improve while you’re paying off your consolidation loan,” says Slot.
In other words, a consolidation loan can temporarily reduce your score, but the long-term impact on your score will be positive if you can manage your debt responsibly.
A hard credit enquiry happens when you apply for credit and a lender checks your credit record to decide whether to approve a loan. They want to learn more about your credit score, how you’ve repaid credit in the past, what debts you have currently, and whether you’ve applied for credit recently.
Each hard enquiry is recorded on your credit report. While this is normal, it can cause a small, temporary dip in your credit score that may last a few months. How much of an impact it has depends on your overall credit profile, how often you apply for credit, and whether your finances are already under pressure.
On its own, a hard enquiry won’t harm your credit health, especially if you repay your debts on time. Still, it’s a good idea to think carefully before you apply for new credit rather than submitting several applications in a short space of time.
Your payment history is the most important factor in your credit score. Every time you make payments on your consolidation loan, it gets recorded as a positive mark that helps build your score.
Having just one debt to manage is far simpler than juggling multiple accounts, which reduces the risk of missed or late payments – a common cause of credit score damage.
Slot says that if you take out a consolidation loan and don’t use it to settle your existing debt, your credit score could decline.
This is because you’ll still struggle with debt repayment – and miss the opportunity to close paid-off accounts. As a result, your credit score may decline.
“Failing to close old debt means an increase in total debt. This is often the case with credit card debt. Consumers will repay the credit card debt but fail to close the account,” he notes.
“This defeats the purpose of debt consolidation, which is to simplify and reduce your debt by placing it in a single account. If you don’t manage your additional accounts well, this could hurt your credit score.”
Leaving old accounts open after debt consolidation creates three key risks:
Close accounts you no longer need, or at least manage them carefully. This can protect your credit score and keep your debt under control.
Surprisingly, closing old credit accounts may cause a small, short-term dip in your credit score. This usually happens because:
The good news? This dip is usually minor. Over time, the positive effect of steady repayments on your consolidation loan will outweigh the short-term decrease from closing old accounts.
Slot notes that when taking out a consolidation loan, your credit score shouldn’t be the main focus. What matters most is whether you can afford the repayments and your commitment to avoiding new debt until the loan is settled.
“Debt consolidation is only effective if the new combined cost of the consolidation loan is less than the sum of the current cost of debt,” he says.
However, it may still be worthwhile if you have more cash in hand each month.
Lower monthly repayments can be helpful, but they don’t always mean the loan is cheaper overall. A longer repayment period or slightly higher interest can increase the total amount you pay.
Always look at the full cost of the loan – interest and fees included – not just the monthly instalment.
Lenders charge different rates and fees, so it pays to compare:
These costs can add up quickly. Make sure consolidation actually saves you money, rather than just moving debt around.
Stretching out repayments can ease short-term pressure on your budget, but it often means paying more interest over time. You might pay less each month, yet more overall.
Balance short-term relief with long-term affordability by asking yourself:
Debt counselling is very different from a consolidation loan.
As mentioned, it’s a formal, legal process governed by the NCA and is designed specifically for overindebted consumers.
While you are under debt counselling, a debt review indicator appears on your credit profile. This doesn’t necessarily reduce your credit score in the same way that missed payments or defaults do, but it does limit your access to new credit.
Under the NCA, credit providers are not permitted to grant new credit to consumers under debt review. Although this restriction can feel limiting, it helps prevent additional borrowing while you focus on repaying your existing debts.
During this time, your credit score may not improve significantly, but making consistent repayments according to your restructured plan can help strengthen your repayment history.
Debt counselling timelines vary and depend mainly on the amount of debt you have and what you’re able to repay each month.
Once the debts included in your debt counselling plan have been settled (with the exception of your home loan, which simply needs to be up to date), your debt counsellor will issue a Clearance Certificate (Form 19) in terms of the NCA.
This certificate confirms that you have completed the debt review process. Your debt counsellor must then notify the credit bureaus so that the debt review indicator is removed from your credit profile.
Once the flag has been removed, you can apply for credit again – but it’s not advisable if you’re likely to fall into a debt trap.
Rebuilding your credit score typically takes time, but many consumers see gradual improvement within a couple of years if they manage credit responsibly and continue making repayments on time.
Used wisely, debt consolidation helps you build a healthier credit profile over time. The key is sticking to your repayment plan and avoiding new debt while you regain control and build better financial habits.
Over time, this improves your chances of qualifying for credit on better terms.
One major benefit of consolidation is improved cash flow. Combining several debts into one loan can lower your monthly repayments, freeing up money for essentials like food, housing, and utilities.
Lower instalments can also reduce stress, making it easier to stay on track and avoid missed payments. With extra breathing room, managing your finances becomes far more sustainable.
Consolidation isn’t just about convenience – it’s an opportunity to rebuild trust with lenders. Each on-time payment contributes to your repayment record, demonstrating that you can manage debt responsibly.
Even if your score dips slightly at first, consistent repayments can reverse this and lead to steady, long-term improvement. Over time, it becomes a strong part of your credit reputation in South Africa.
Not necessarily. While a hard credit check may cause a small, temporary dip, regular on-time payments usually improve your score over time.
Credit bureaus typically update monthly. With consistent repayments, you could see improvement within six to 12 months, depending on your credit profile.
It depends on your financial habits and credit goals. If you’re disciplined enough to leave your accounts untouched, keeping them open can actually benefit your credit score – open accounts with zero or low balances improve your credit utilisation ratio. However, if open accounts tempt you to spend, it’s wiser to close them. This may cause a short-term dip in your score, but the temporary drop is far less damaging than accumulating new debt on top of a consolidation loan.
As a rule of thumb, keep an account open if it carries no fees and you won’t use it much, and close it if you’re tempted to overspend.
Not automatically, but lenders will look at your existing commitments. It’s best to avoid new credit until the consolidation loan is paid off.
It depends. Consolidation combines debts into one loan and works best if you can afford the repayments. Debt counselling is a legal process designed for those who are already struggling to cope with debt.
Debt counselling (also known as debt review) is a legal process under the National Credit Act (NCA) that helps overindebted consumers restructure their debt into affordable repayments.
It protects them from legal action provided they comply with their repayment plans.
Not in the way you expect. Entering debt counselling doesn’t automatically lower your credit score – in fact, making consistent payments in terms of your restructured repayment plan can reflect positively on your profile over time.
What does change is that a debt review flag is added to your credit profile for the duration of the process. This flag tells lenders you’re under debt review, which means you can’t take on new credit while the flag is active. Once you’ve settled your debt and received your clearance certificate, the flag is removed and you can begin rebuilding your credit profile.
No. While under debt counselling, you may not take out new credit until your debts are settled and a clearance certificate is issued.
Debt counselling continues until all short-term debts are paid up and long-term agreements are up to date, after which a clearance certificate can be issued.
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