How does Balance Transfer Affect My Credit Score

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How does Balance Transfer Affect My Credit Score

A balance transfer can be a good way to pay down credit card debt. Depending on several factors, though, balance transfers can help or hurt a credit score, as well. Someone with excellent credit (a score of more than 740) may qualify for some of the best balance-transfer cards. Those with scores not as high may still qualify for good deals—but may not be granted initial credit lines sufficient to transfer large balances and may want to ask their existing card issuers to consider lowering rates on any balances not able to be transferred.

1. Lower Credit Utilization

Your credit utilization rate—the relationship between your credit card limits and balances—is an important factor when it comes to your credit score. If you open a new credit card account and transfer balances from other credit cards to it, one of the side effects could be a lower credit utilization rate.

2. A Hard Inquiry on Your Credit Card

If in order to transfer the balance, you apply for a new credit card, the lender conducts a hard credit inquiry on your credit report. Each hard credit inquiry lowers your credit score by a few points. In the majority of cases, you need not worry about how credit inquiries affect your credit score – but if you are on the verge between average credit and good credit, it might be worth considering how a credit inquiry can impact your credit score.

3. Having a Shorter Credit History

Your credit score is significantly influenced by the amount of time you have had credit. Your credit score could be lowered if you close an old credit card after moving the amount since you might end up losing some of the credit histories you've accumulated over time.

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