Balance Transfer effects on Credit Score

[6FeetUnder]

I was wondering... Would transfering a balance from a credit card to a new lower interest rate CC actually help your credit score? (Showing a large paid off balance, however, the debt to credit ratio stays the same, but used to available credit ratio goes down)

Any comments or suggestions?

Chris

[poundwise]

Re: Balance Transfer effects on Credit Score


"Every time you apply for credit, a credit inquiry shows up on your credit report and stays there for two years. A lot of credit card inquiries will hurt your credit score, especially if you keep applying and getting turned down for credit cards. One credit card application a year isn't excessive if you're not applying for other types of debt."

-- from Bankrate.com


If you are doing the 'new card/balance transfer' thing a lot, say every 6 months, then you will likely hurt your score.

Otherwise, one thing to keep in mind is that the age of credit is a component of your credit score. Therefore, if you transfer a balance to a new card and close an older one, then you could hurt your score that way as well.

The way that opening a new account and transferring a balance may help you is if you keep the old account open after the transfer. Then you will have, by nature of having new credit open to you, improved your debt to available credit ratio.

If you transfer the balance and keep the older one open, you will just need to be cautious as to how you manage your open lines of credit. Also, if you are seeking a mortgage or refinancing, you should be aware that open lines of credit are viewed as debt, or potential debt, by lenders, which could effect your rate for such loans.

If you carry a balance and can move your balance to a zero percent card (assuming you can do the transfer free of charge) then I think that outweighs other considerations anyway. However, the idea of jumping from one card to another to stay on a short-term 0% offer with multiple cards seems to me to have much greater potential to harm your credit score than to help it.

If you are asking should you do it once, or maybe as often as once a year or two, then sure. As long as you are wisely managing your use of your credit, it seems that it would be ok credit score-wise. If you asking if doing so would specifically help your credit score, I don't think overall that it would do much of anything to boost your score. I suppose it depends on other factors such as if you carry a balance, how much of one, and total available credit, etc.