It's a big term that you'll see a lot once you start researching how to get rid of your build up of bills, but what exactly does it mean; how does the debt consolidation process work? It's actually a pretty simple concept once you lay it out, and has the potential to help you build up a good credit score again, but it does take time and a good amount of effort to do well.

The basic idea is that you get a loan in the amount of all of your various debts and use that money to pay off all of those old debts. You now focus on paying off your new loan.

This helps your credit in two ways. First of all, you have paid off and closed all of those debts that you were in trouble with. Second, you can build up a history of on time payments with this new loan, which should help improve your score over time (once you have finished paying it off).

There are difficulties with this, however. The biggest obstacle with this plan is that most people don't start thinking about debt consolidation until their bills have mounted and they're already late and in trouble on a couple of different accounts. This means that your credit has already been pretty badly damaged, and it can be hard to get a new loan.

There are consolidation companies that do nothing but work with people in these situations, but they will charge you fees for this service which can make things take longer. If you decide to go this way you'll want to read the terms and conditions carefully to make sure you can afford it (which is something you should do before entering any financial agreement).

Other ways to get over this obstacle are to simply keep researching lenders until you find one that will work with you, or look into secured loans. When you offer some form of collateral (real estate or a vehicle are most common but some lenders will accept jewelry or other high priced collectibles) lenders are more willing to work with you despite credit problems, and are more likely to offer you more reasonable interest rates.