Help! I want a debt consolidation loan

Dear Dr. Don,
At this very moment I'd like to consolidate $12,000 worth of credit card debt. I applied for a loan with my credit union and was turned down for overextended credit. How can I consolidate my debt and end the overextended credit situation?

I have since closed accounts and asked that my balance be lowered. At the same time, I'd still like to consolidate my credit card debt! I also would apply for another loan, but I am scared that the many inquiries would affect my credit. Please...I need your advice! -- Glennis Group

Dear Glenis,
Closing down accounts doesn't help your credit score in the short run and won't help you get credit. Reducing your credit lines doesn't help either.

Credit scoring models use the information on your credit report to estimate the probability that you'll repay a loan. One measure used is the ratio of credit used to available credit. Canceling accounts and reducing credit lines actually increases this ratio, making it appear as if you can't manage credit. Bankrate has partnered with FICO to provide you with a free estimate of your credit score.

Debt consolidation benefits borrowers when they can either extend the term of the loan or reduce the effective interest rate on the loan. The loan term on your credit cards is open ended, so there's no need to extend. Getting a lower rate depends on your credit history, and your current actions have muddied the waters, at least over the short run.

Every time you apply for credit, that application stays on your credit report for two years. You're right in not filling out multiple applications. It makes you look desperate and lenders hate lending to desperate people.

Focus instead on reducing your balances the old fashioned way, by paying them down over time. Make more than the minimum payments and focus on your highest interest rate cards first. You'll get to the point where you'll qualify for a debt consolidation loan and be in the enviable position of not needing one.