Do Balance Transfers Hurt Credit Scores?

Taking advantage of a balance-transfer offer can help you pay down your credit card debt more quickly. But pay attention to your debt-to-limit ratio when participating in a balance transfer to protect your credit score.

The Facts

Balance transfers are a simple way to escape your current credit card agreement and enter into one that better suits your needs.

Debt-to-Limit Ratio

The ratio of how much you owe on a credit card compared with your spending limit is called a debt-to-limit ratio. Your debt to limit ratio is responsible for 30 percent of your credit score.

Benefits

Balance-transfer programs often offer introductory low interest rates. This can help you pay down your debt-to-limit ratio faster and improve your credit score.

Disadvantages

Some credit card companies charge high fees for balance transfers, which can reduce the benefits of the transfer and make paying down the balance more difficult.

Warning

If the balance you are transferring puts you close to the limit on your new card, be careful using that card after the transfer. Going over the limit will hurt your debt-to-limit ratio and your credit score.

References

• What's in Your FICO Score?
• Would a Credit Card Balance Transfer Help?