How do balance transfers affect my credit score?

how do credit cards affect credit score

Under the right circumstances, a balance transfer can be a good way to pay down credit card debt. Depending on several factors, balance transfers can either help your credit or hurt it. By initially applying for several different cards with low introductory rates, you can negatively affect your credit. Fifteen percent of your credit score is based on the length of time your credit accounts have been open. The longer you have your accounts, the better your score. By opening several new accounts, you bring down the average age of all your credit accounts, thereby hurting your credit.

Every time you apply for credit, a hard inquiry is made on your credit report. Each hard inquiry has the potential to lower your score by 35 points.

If you apply for five different cards, you could lower your credit score by up to 175 points. To keep the negative effect on your credit at minimum through the application process, do your research and only apply for one card. After transferring a balance to a new card, keep the old account open.

Closing a credit account can negatively affect your credit but by keeping existing accounts open, your average account age remains high. If possible, find a card with a credit limit much higher than the amount you need to transfer. Exhausting your credit limit brings your credit utilization ratio down, which accounts for 30% of your score. Finally, making payments on time is a crucial part of maintaining a good credit score.


Category: Credit

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