As with anything in the lending world, consolidating your student loans, especially multiple times, can damage your credit rating. Not all consolidation loans will damage your credit. If you transfer debt to an existing account, it is unlikely your score will change at all. The key to reducing the impact of consolidation is to avoid anything that might look negative in light of the consolidation.
Identification
If you have to apply for a new loan account, the creditor usually performs a credit check which does up to five points in damage. If you consolidate federal student loans, you do not go through a credit check. The only requirement to consolidate federal student loans is that your accounts are not in default.
Length of Credit History
Private lenders probably will perform a credit check unless you transfer your debt to an existing account. If, for instance, you have a student loan of $5,000 and another at $10,000 with another lender, the creditor probably can just combine the two accounts and avoid the application process. A new account, however, lowers the average of all of your accounts, which would lead to an additional drop in your score.
Recovery
As long as you handle the rest of your accounts responsibly, such as always paying at least the minimum payment on time and not adding any credit card debt, the effects of consolidating student loans will last only a few months, according to MyFICO. If you have to apply for a new account, you should avoid applying for other new creditable accounts for the next six months to a year because multiple queries within a month makes you appear desperate for credit.
Considerations
You should consolidate your student loans only if doing so will lower your interest rate. Constantly shifting debt around and never tackling the balance delays the issue of not being to pay back the loan. However, federal loans have some benefits such automatic deferral in case of a hardship that you will lose if you consolidate them with private loans.
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