How Can A Balance Transfer Credit Card Affect My Credit Score?

How Can A Balance Transfer Credit Card Affect My Credit Score?

For those people who might be wondering how a balance transfer can affect your credit rating, please read my article. Unfortunately, there is no clear cut answer written in stone. However, if you follow a few general rules you can limit any negative impact a balance transfer from another credit card will affect your credit. Take a look a look at the following list of suggestions if you want to minimize any damage to your credit rating.
Fist of all, do not max out your cards. Your FICO credit score is based on something called your credit utilization ratio. This means that if you utilize too much credit, you will negatively impact your credit score. A healthy utilization ratio is somewhere around 30%. Therefore, if you have a credit card with $20,000 in credit you should not spend more than 30% of that available credit. 30% of $20,000 is $6000. How does this affect a transfer you might ask? Do not transfer a balance to a credit card with limited available credit.
Secondly, close your newest charge card accounts. That is correct. Keep your oldest account open and close off your newer ones with less credit history. It is more damaging to close and older credit account that has good history on it than it is too close newer ones. Closing new accounts does not affect your score as much. Keep your credit utilization ratio as low as possible and you will have fewer credit problems, even if you transfer a balance from another credit card.
Pay whatever amount your transferred from another card during the trial period comes in third on my list. Charge card issuers are always looking to get your business in one way or another. 0% introductory offers are very common in today's marketplace. These trial periods give away free interest for a specified amount of time. However, at the end of the trial period, interest always accrues on any unpaid balance that you might have. Therefore, if the regular APR after the trial offer is over is 19% then you will get hit with 19% worth of interest on any unpaid balance. If the trial offer is for more than a year, you will get hit with more than a years worth of interest. On the other hand, if you plan for your payments to pay the balance in full then you will essentially have your self an interest free loan. The fact that you paid your balance off in full will also positively affect your credit.
Lastly, a balance transfer from another credit card is not necessarily a bad thing. 0% introductory offers have saved many people some money. If you use some common sense you will not affect you negatively. Do not keep balances with more than 30% of your credit limit. When you transfer a balance from another card be sure that you are not going to max out the new credit card. If you do, you will more than likely affect your score in a bad way. However, keep all your balances low and your credit will be high!




Todd Holliday is a consumer credit advisor who specializes in various subjects such as credit cards. He enjoys writting about 0% introductrory offer credit cards and 0% introductory offer credit card