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Opening new credit accounts is a two-sided coin. On the one side, having more available credit is a positive for your credit score, because it improves your debt-to-credit ratio - giving you more available credit. On the other side, applying for new accounts can have a short-term negative effect on your credit score, as each credit inquiry form an issuer will usually drop your score by a few points.

When you transfer your debt to a new balance transfer credit card, you trigger certain changes that can impact your credit score either positively or negatively. Here's what changes when you transfer your debt to a new account:

  • Your credit utilization ratio changes. Since you applied for a new credit card to perform a balance transfer, you increased your available credit, which is good for credit utilization. However, when you transfer your debt to a new credit account, you can use most of the available credit limit on that card, which is bad for your credit utilization. The good news is that your credit utilization will improve as you pay off your debt (provided you have no new debt accrued).
  • Your overall age of credit changes. This is especially true when you transfer debt from one of your oldest accounts and then close it. While the age of credit does not impact your credit score as much as the debt-to-credit ratio, it still may be noticeable.
  • You add hard inquiries to your credit reports. If it's not just one card you are applying for, or if you have a habit of opening new credit cards and repeatedly transferring balances between them, you may hurt your credit. Too many hard inquiries may drop your credit scores noticeably.

In general, balance transfers are a good bet to improve your financial picture. Here's how you can help boost your credit score using a balance transfer card:

  • Keep older accounts open to contribute to your average account age.
  • To positively impact your credit score after a balance transfer, try keeping your previous high-interest account active with periodic affordable purchases that don't compromise your new payment schedule.
  • Don't be a serial account opener, bouncing your balances from card to card. Choose a good balance transfer offer, preferably one with a long introductory 0% APR period. Then do your best to pay that balance off within the promotional period. Keep new credit applications to a minimum.
  • Consider autopay to make sure you pay your bill on time every month.
  • Accounts from which you transfer balances don't get closed automatically, so make sure you make all monthly payments on time.

If you are paying a high APR on your credit card balance, take a look at the many great 0% APR balance transfer offers available to help you pay off your balance faster. Depending on how much you owe and the interest rate you are currently paying, doing a balance transfer could save you hundreds of dollars in interest charges, provided you use the balance transfer to eliminate your debt faster, not merely to extend or ignore debt.

tags : Balance Transfers Credit Score Low Interest

Disclaimer: This editorial content is not provided or commissioned by the banks or credit card issuer(s). Opinions expressed here are the author's alone, not those of the banks or credit card issuer(s), and have not been reviewed, approved or otherwise endorsed by the banks or credit card issuer(s). Reasonable efforts are made to present accurate info, however all info is presented without warranty. Consult with the issuing bank of the card or account for terms & conditions.
All rates and fees, and other terms and conditions of the products mentioned in this article/post are accurate as of the last update date but are subject to change. See the current products' Terms & Conditions on the issuing banks' websites.