Balance Transfers and Credit Score
Advertising Disclosure is an independent, advertising-supported web site. receives compensation from many credit card issuers whose offers appear on our site. Compensation from our advertising partners impacts how and where their products appear on our site, including, for example, the order in which they may appear within review lists. has not reviewed all available credit card offers in the marketplace.
Credit Card Applications » Research » Guides » Balance Transfer Cards » Balance Transfers and Credit Score

Balance Transfers and Credit Score

Add to Favorites:
Balance Transfers and Credit Score

Transferring high interest rate balances to a new credit card that comes with lower rates is a smart way to pay off your old balance faster and on favorable terms. But before you move your old balance, you need to work out certain considerations. One of the questions frequently asked by consumers in relation to balance transfers is whether balance transfers affect credit scores? And if so, in what way do balance transfers impact your credit score rating? Here's a brief look at the factors you should take into consideration before transferring your old balance.

Even though we do not know the top-secret credit scoring formulas, we know the weight of its components in the calculation. The payment of a customer weighs the most – 35%, the amounts owed – 30%, the length of credit history – 15%, the types of credit – 10%, new credit – 10%. When applying for a new card, it's important to take into consideration the factors that may increase or lower your credit score.

And when it comes to balance transfers, it’s very important to understand how this or that move can affect your credit score. The best thing about balance transfer applications is the opportunity to transfer your high rate balance on the card with low rates and pay it down on good terms.

When moving the balance, you’re likely to be unsatisfied with the high interest rates of your old card and you may wish to cancel it. In fact, closing a credit card is a very common mistake of those people who make balance transfers. When you close out the account you’ve had for years, you decrease the amount of available credit and it may negatively affect your FICO score.

In addition to that, canceling old accounts may hurt your debt to credit ratio. Ideally, there should be a big gap between the available credit and your outstanding balances. Getting your balances below 30% of the available limits can help you maintain an excellent debt to credit ratio. Before transferring your balances, do a little homework beforehand. Be sure that balance transfers won’t hurt your debt to credit ratio and thus your credit score.

When you apply for a balance transfer card and open a new account, you may see a slight increase in your score rating. If you leave the old card open, applying for a new card can actually have a positive effect on your score, as the amount of available credit will be increased. Again, the individual results may vary greatly. The key is to keep a healthy debt to credit ratio and pay your balance off on time.

Another secret of successful balance transfers is to avoid making new purchases. Very often, balance transfer offers come with cash back or travel rewards programs, so you may be enticed to use your new card for making new purchases and collecting rewards. It’s all good and well, but first you should pay off your balance in full. After that you may feel free to make new purchases on your card.

Add to Favorites:
Get the latest news, articles and expert advice delivered to your inbox. It's FREE.

Related Research:

How to Get Free Wi-Fi in the Air

By Herbert Moore, Posted: September 28, 2016

Sometimes in-flight Wi-Fi is the bare necessity when you travel abroad or within the country. However not all airlines offer free in-flight Wi-Fi. There is only a couple of airlines that will allow you to use Wi-Fi ... Continue reading

Amazon Credit Cards Review

By Allison Martin, Posted: May 30, 2016

When was launched 20 years ago, few could have envisioned how far the company would come. What was once an online specialty bookstore is now an Internet juggernaut that sells nearly anything and has made major inroads into ... Continue reading

How Much Do Shell Cards Really Save on Gas?

By Allison Martin, Posted: April 20, 2016

There is an endless amount of gas cards on the market, and practically every major gas station, including Shell, has options to choose from. In fact, Shell offers two options for gas cards for consumers. Continue reading