By comparison, the principle on the bill from the debt consolidation account might be about the same amount as you'd cough up when writing out checks on the stack of individual bills.

All things considered, debt consolidation is generally a good idea. The best way to make it work for you is to either go through a lender who specifically offers debt consolidation accounts or by assigning all your high monthly payments into one account that charges lower interest. The overall effect is your interest payments are reduced, even if you're paying slightly higher interest on the consolidated account.

If you're thinking about debt consolidation to get out of a tight spot, get ready to read the small print on that application. Debt consolidation lenders are notorious for preying on desperate consumers, luring them into contracts by offering a 0% APR on consolidation. They often fail to tell you up front that the interest rates will go up after the “introductory period”. Believe me, that sweet deal can turn into an expensive financial fleecing in the long run. You will want to get someone to help you out with reading and interpreting the Terms of Service before you sign any official paperwork.

What? You've discovered that you've already fallen victim to a 0% to 30% interest increase (or some other outlandish amount) after just 6 short months of good payment history? Well, stop feeling sorry for yourself. Kep up those regular on-time payments. Pay a bit more than minimum each month if you can. You'll eventually have the last laugh because your credit report will be a lot more attractive to future lenders.

Sure, you're paying a boat load in interest on one account, but if you can make regular payments despite the high interest, you're credit report is just showing that one all-important account. Your other accounts were pured into this one when you consolidated your debt. The other creditors have been paid off! They're out of the reporting picture.

What makes this good for you is that if you you fall a bit behind on you payments, you only owe one company money. More than half the battle to achieving a good credit report is over. If worse comes to worse and you fall even farther behind, you only get a bad mark from one creditor – the debt consolidation company!