How will credit card balance transfers affect my credit score and rating?

How will credit card balance transfers affect my credit score and rating?

Transferring balance from a high interest credit card to a new lower interest card can definitely save you money on interest, if nothing else at least until the introductory rate ends (if applicable). We all receive those infamous credit card offers in the mail, urging us to apply for a new card and transfer our high interest balance over, in order to take advantage of the lower interest rate that this new card has to offer.

This seems like a logical thing to do, right? I mean, lower interest rates on your credit accounts equals more money in your pocket, true? Yes, transferring your credit card balance from a high interest credit account to a lower one is an excellent way to save money on interest, especially if you carry a lot of debt on your credit card(s).

But how does this affect your credit rating and credit score? The answer to that question really depends on your situation, and how you go about it.

A closer look

Lets say you have $5,000 in debt on a credit card account from “ABC Credit Services”, which has a total credit line of $10,000. For this example, lets just say this is currently your only open credit card account. Since your debt takes up half of your total credit line, this would put your percentage of debt compared to your credit line, for this account, at 50%. We’ll call this your “debt percentage”.

You’re making payments to ABC with no problems and you seem happy with the account and the interest rate. That is, until one day you check your mail, and there it is, a credit card offer from “XYZ Credit Services” with a fixed interest rate set at half of what you’re paying now with ABC! Suddenly dollar signs start popping up in your head, and you start trying to figure out how much money you could save by transferring your $5,000 balance to XYZ. You then decide you’re going to apply for the account at XYZ. Your credit is good right? No problem! You receive the card in a week or so, and go ahead with the balance transfer.

So how does this affect my credit score?

How this balance transfer affects your credit rating and credit score really depends on what you do from this point on, and also what your credit line is on your new card from “XYZ”. If your credit line on your new card is lower than that of the original “ABC” credit account, then your “debt percentage” will be higher, which generally will lower your credit score. This would be true if you closed the original account at ABC, and kept your new account as your only open credit card account.

If you’ve had your “ABC” credit card for a while (maybe 2 years or more), and you have a good payment history with them, then it will most likely be in your best interest to keep that account open, even if you don’t use it. Especially if your credit line with your new lower interest card is below $10,000. Usually for the sake of your credit score, you don’t want to increase your “debt percentage”, you want to decrease it.

For example, if you keep both accounts open, you will have a total credit line of $20,000. With your $5,000 in debt on your new card, and your original account at ABC having no balance, your debt percentage would only be 25%, which is a good percentage and your credit score will reflect that.

Now reverse that and say that you closed your credit account from “ABC”, given that your credit line at “XYZ” stays the same, you would have a debt percentage of 50%, which is what you started out with in the beginning. Add to that a newly acquired credit card with little or no payment history on it, and you’re credit score would almost surely decrease, at least until you establish a longer payment history on your new account.

So for this example, it would probably be best to keep both accounts open. Your lower debt percentage could possibly offset the hit your score took from obtaining your new credit card. And looking to the future, it should look better on your credit report this way too.

Avoid increasing your debt percentage

When trying to keep your credit score as high as possible, try to avoid doing anything to increase your debt percentage. Even though the amount of debt you are carrying on your “revolving credit” is the same, it will always look better if you’re using 25% of your total credit, compared to using up 50% of it.

But don’t try too hard to decrease it either

Be sure not to take it too far by applying for more credit than you need, just because you think it will help your credit score by having an even lower debt percentage. Obtaining any new credit will generally bring down your credit score slightly, at least for a short period of time. Applying for credit too much and too often will almost always have a negative impact on your credit score, which is exactly what you don’t want. Your time would be better spent on trying to pay down this debt instead.

As with anything, being informed is the key

Balance transfers such as this can and will save you money on interest, if you do it right. Stay informed about how things like this affect your credit, and you should be just fine!

Be sure to check out our article on how to get a credit report and score – totally free. In that article I discuss how to obtain a free credit report at absolutely no cost.

76 thoughts on “How will credit card balance transfers affect my credit score and rating?

  1. Melissa Lafuente

    Hello – I am in the middle of purchasing a home and the closing wont be done until the end of August or September. I have been pre-approved already with the lender/bank. I received an offer from Citi to transfer balance with 0% till 02/01/14 and then the fix rate that I currently have for 15.99% will start if I don’t pay the account in full. I can transfer up to 4 credit accounts for up to $9300 – I want to do this if and only it doesn’t affect at all the process of the mortgage that I have. Will this reflect or have any impact at the time of closing with the lender? I was told that at closing they run your credit again and check that nothing major has been done. I also wanted to know that if I do decide to do a balance – it does however have a 4% charge to transfer – and I don’t pay off the full amount by 02/01/14 – does this affect my credit score? Does it affect my credit score at the time of transferring the balances? I wanted to do this because I noticed that the lender is adding up all my minimum payments do from all my credit card debts and adding everything up I have around $970 per month of payments, and if I can transfer 4 accounts into this Citi – with a 0% interest, then this will only show as one payment – but I am not exactly sure if it will affect anything else.
    I appreciate your help and time on this. Thank you – Melissa

    Reply
  2. Maxedout Stressedout

    Hi,

    I have balance of 10K in one Credit card and 4K in another. I also got a new credit card with $3k limit, that I have not even activated yet.

    I am quitting my job in about 2 weeks and will be out of country for about a year or so, because of a family health situation. However I will be back in in the country in about a year or so and would like to do something to settle/consolidate my debt, before I leave the country, incase there are any issues after I leave and I have problems once I am back. I absolutely do not want to to get into any situation with being sued or have warrants on my name or what have you. I am a normal person and have not had any problems with the law etc so far, except for not being able to pay back the Creditors.

    I will be leaving in about 3 weeks and need to know how to handle this best. I have very little in savings + miscellaneous cash (less than $6k). I am considering debt consolidation/settlement and am willing to use some of the $6k saving to get this ordeal off my back before I leave. However, I would also need to save whatever cash I can to help my family with the medical situation.
    1.How can I do this in a way that my debt gets settled/consolidated and I also am left with some cash to take with me with my move?
    2. Can I settle the debt with the credit card directly vs. with the settlement/consolidation company??? That would be ideal, or would it??
    2. WHat is the difference between consolidation and settlement? Which one is better? Which affects your credit less and which is easier and faster to deal with?
    3. The 2nd option I am considering is doing a balance transfer of both the cards, into a new card with 0% apr until August of 2014. Chances are I will be back in the country till then, but do not want to take any chances with the creditors/settlers. Id like to settle this ordeal before I leave if possible. Once I get the balance transferred, can I work with the new credit card people directly to settle/consolidate the debt?? Or do I at this point, still go through the settlement company?

    Of the 2 options, which one is better?

    THanks so much for helping me out with my problem!

    Reply
  3. DD

    What does “short time” mean? Have been reading about balance transfers and understand if your credit is hit, it’s only for a short time” if it does happen. Want to refinance my house as well, but are we talking days or weeks? Have to make decision tomorrow.

    Reply
    1. admin Post author

      DD, I would say a short time would mean approx 6 months, maybe shorter maybe longer depending on many other things as well.

      Reply
  4. Charlie

    I see on my credit report cards issued in my wife’s name with me as an authorized user. So if I have a number of high limit low balance credit cards in my name only, if I add my wife as an authorized user, does that then improve her credit score by reducing her debt ratio? And vice versa?

    Reply
    1. admin Post author

      Charlie, yes from my experience that’s exactly the way it works. I have my wife added as an authorized user on my credit cards, those accounts show up on her credit report the same way they show on mine, which means she benefits from the lower debt to limit ratio!

      Reply
  5. JJ

    MY WIFE AND I ARE GETTING A SIGNATURE LOAN, AND WE ARE PUTTING OUR CAR (WHICH WE JUST PAID OFF) AGAINST A LOAN BOTH OF WHICH HAVE MUCH LOWER INTEREST RATES. NOW WILL IT HURT OUR CREDIT IF SAY, WE WERE TO PAY OFF 5 CARDS, AND CLOSE 2 OR 3 OF THOSE ACCOUNTS? BOTH OF US WILL PROBABLY BE DOING THIS. WE WILL BE PAYING OFF MOST OF OUR DEBT, CREDIT CARDS, DEPOT STORES, ETC. WE WILL CLOSE ALL DEPT. STORE ACCOUNTS, AND MAYBE A FEW CREDIT CARDS. HOW WILL THIS AFFECT OUR CREDIT, AND IF IT DOES, HOW LONG TO GET IT BACK TO GOOD STATUS? WE ARE STARPPED, AND OUR INTEREST RATES ARE RIDICULOUS!! WE ALWAYS PAY ON TIME, AND PAY MORE THAN THE MINIMUM, AND OUR CREDIT SCORES ARENT THE GREATEST, BUT BOTH ARE A SMIDGE ABOVE 700. LIKE I SAID BEFORE, ONE OF MY CARDS IS OVER 30%, AND A FEW MORE ARE AT MID TO HIGH 20′S! HOW CAN THEY DO THIS?

    Reply
  6. Kasia

    I currently have 2 credits cards.
    The first, has a $10,400.00 limit of which I have used about $7,500.00. The other has a $4,000.00 limit of which I only owe about $200.00.
    Recently, I received an offer from the second card (the one with $4,000.00 limit)of 0% interest on balance transfers. Would it make sense to transfer about $3,800.00 from the other card that has a pretty high interest rate onto this card (which would max out this one)? Or leave them as is?
    If you add the 2, my total available credit limit is $14,400.00 and I have used about $7,700.00 which is about 50%.
    I want to try to refinance my home within the next couple of weeks and I don’t know which scenario would be best for my credit score.

    Reply
    1. admin Post author

      Kasia, just transferring balances from one credit card to another existing card should not affect your credit score in a significant way. If it makes financial sense for your situation, I would recommend doing it, from my experience it shouldn’t affect your chances of being approved for a refi. I’ve read different info about if it’s best to have your balances spread evenly among multiple cards, or more balances on one or more of several cards… it’s kind of like 6 for one and a half dozen for the other, but I have not personally noticed a difference in my credit score either way. I always recommend taking the route which helps you pay down your balances faster, that’s the most important thing!

      Reply
    2. TJ

      Kasia,

      It’s easy to get acustomed to paying a few hundred bucks monthly towards your credit card balances. All your accounts stay “paid as agreed” and you’re still paying more than the minimal payment. What I would do(or actually DO do), is make 2 list 1. All bills that CAN be paid with a credit card 2. All bills that have to be paid with CASH. If you’re like me, 97% of your utility, rent/mortgage, food, gas, etc can all be paid with a credit card. So the key is STOP USING CASH. Use almost your entire paycheck and/or other income to pay down your credit and then use your credit card to pay all your bills. Once you have good credit, the only other factor that can truly raise or lower your scores are your balances. By carrying a 10% credit utilization rate you can raise your scores by 30-50 points. You’ll max out somewhere between 738 and 779 and after that only time can raise your scores. The value in my suggestion is knowing that the card company will report your balance as of the last date of your billing cycle. Your job is to make sure your balance is only $10 by that date. Mine are the 9th, 10th, 28th. My due dates are exactly 3 days before each billing cycle date. So I pay my balance down to $10, wait 3 days until the bill cycles, and then on the 11th, 12th, and 29th, I use those same cards to pay bills, go to games, dinners out, the key is to not to spend more than you earn in a month and your paycheck will be just enough to pay down your credit debt each month and at the same time your credit scores will be as high as they can be.

      Reply
  7. JJ

    I CALLED THE BARCLAYS (JUNIPER) ACCOUNT THATS 31%, AND THEY SAID THERE IS NOTHING THEY CAN DO FOR ME! AT LEAST THATS WHAT I THOUGHT SHE SAID, HER ENGLISH WASNT THE BEST! I TOLD HER I WILL BE CLOSING MY ACCOUNT ASAP TOO, AND SHE DIDNT ACT AS IF SHE CARED?!?! I WILL TRY THE OTHER REALLY HIGH RATED CARDS. OTHER THAN THAT, IF WE WERE TO GO THROUGH WITH THE LOANS THAT I MENTIONED, WOULD IT MAKE SENSE? HOW BAD WILL IT HURT TO PAY OFF 5 ACCOUNTS, AND CLOSE 3 OF THOSE ACCOUNTS AFTER THEYRE PAID OFF? IM JUST REALLY CONFUSED, AND FRUSTRATED ABOUT WHY MY RATES ARE SO HIGH!! WE HAVE A MORTGAGE LOAN, WE JUST PAID OFF OUR CAR, WE DO HAVE TOO MANY CREDIT CARD ACCOUNTS, BUT WE PAY ON TIME, AND MORE THAN THE MINIMUM! I DONT UNDERSTAND HOW THESE CROOKS CAN DO THIS?!?! THANKS FOR YOUR HELP!

    Reply
  8. JJ

    i keep forgetting to write things that may help what advice you may have to give! my highest rate is 31%!!! wow!! how is that legal? i make every payment on time, and more than the minimum too!! i have a few that are at 29.99%, and all the rest are in the mid to high 20′s also! my wifes are all around 15-20%.

    Reply
    1. admin Post author

      JJ, you might try calling your CC company and asking for a lower interest rate. Many people have had their interest rates slashed just by asking! You could mention something about the fact that you are a good customer and make your payments on time, and you have received other credit card offers in the mail with lower rates and are considering a balance transfer and switching companies. Chances are you will hang up for phone with a significantly lower interest rate than you had before. Just like any other company, they don’t want to lose your business and if they know you are considering other options, they will probably want to do their best to keep you as a customer. Give it a shot and see what happens! I’d love to hear the results if you get the chance to come back and give us an update.

      Reply
  9. Cenor

    Balance Transfer really helped me to save on interest. With $5000 amount transferred, I saved around $740 interest paid in 12 months. Once the 12 months period ended, I will repeat the Balance Transfer process with other credit card.

    Reply
  10. Dede

    I have 3 cards at high interest rates (28%, 21% and 18%), combined the debt is about 18,500. I reached out to my credit union to figure out a way to pay off my debt sooner (to buy a house in the future) – I have 2 options (I have been approoved for both.)

    Personal Loan at 12.99%
    Visa CC 9.8%

    In both instances I would have to close my 3 current cards (they are at probably 60% debt), so my debt % would likeley go up b/c either the loan or the credit card would be at the top of the limit.

    I’m not sure which option would be better on our credit scores. I plan on paying this debt off in 2 years, regardless of which option I choose. Long term, they both are going to be much better than my high interest cards. Just wondering if one looks better or affects my fico score more/less.

    Reply
    1. admin Post author

      Dede, that’s tough to say for sure which one would be better for your credit score, but you’re absolutely right, both options are much better than the situation you are in now! Personally I would probably go for the personal loan, close the 3 cards you have now as you mentioned, and then maybe apply for another CC or get a prepaid card and keep the balance as low as possible on that account. As you probably know, your revolving debt to credit limit ratio (credit card debt to limit percentage) is a big factor in determining your credit score. The personal loan shouldn’t be considered a revolving account as a credit card would be, so to me it sounds safer that way.

      Either way you go sounds like a good financial move at this stage, good luck!

      Reply
  11. Mike

    I am recently married and my new bride has a credit card with a low limit and high interest along with monthly fees. If I add her to my credit card account and close hers, will it affect her credit or mine? I have a high limit, low interest, no monthly fees and have had this card for over 10 years. My credit score now is over 800.
    Thanks

    Reply
    1. admin Post author

      Mike, I have had some experience with this sort of thing before, it should not affect your credit at all. But how it affects her credit depends on how long her CC account has been open, and you would have to consider any balances and how high her credit limit is on that card as well. I always try to keep old, good standing CC accounts open, if possible, because things like that look great on your credit report. But if your wife’s account is fairly new, considering your account is 10 years old and sounds like it’s in good standing, then it would probably benefit your wife’s credit to at least add her to your card. It certainly wouldn’t hurt to add her to your account, but as far as canceling her old account, I would need more info on that to get a better picture of what might happen. If keeping her old CC account open is an option, even after adding her to yours, you might want to consider that.

      Reply
  12. Andrea

    Just wanted to say thank you for this website and all the great informatin. I got my cc answer right away an proceded to the comments that were even more helpful. I just go a third cc of 2000$ and put 969$ on it and was a little worried about my score because the other card balances were 0$ of 1500$ and 800$ of 3200$. If I would have known sooner I would not have gotten the new card because Chase gave me checks to balance transfer, which I did and then I got nerveous after a few times and decided to try and get a 0 interest Discover card which I was happy and suprised to get on a fixed income. I’ts only 2000$, but that’s enough for me, it’s Discover! Anyway, thanks again and by the way my credit score was 753 at the time!

    Reply
  13. Shashi

    I want to pay my college fees with my citi card. Since, they are offering 0% apr on balance transfer, can i take a check from them on my name and pay my college fees instead of directly getting my credit card charged. This way i can get 0% on that purchase instead of my current 9.24%apr. Is this an option to me.

    limit $6100
    college fee-$2000
    current balance $500

    Reply
  14. Linds

    I have a card with a high credit limit and a second card that is about a year old and the 0% is about to expire. Work has been bad and I’m going to start struggling with bills if I’m not careful. Would it hurt my credit to open another card to continue that 0% for another year? The balance is about 3500 and my credit is excellent. I just wonder if the money I save would be worth any hits I might take on my credit score.

    Reply
    1. admin Post author

      With transferring balances, a lot of people worry excessively about the affect it might have on their credit score. If you have determined that it’s a good financial decision to apply for another 0% interest card which could bring much needed savings on interest, then I would go for it. Every time you open a new account your score will take a slight hit, but it’s only temporary. As mentioned above, that hit can be offset by an increase in total credit line if you are approved for a new CC and transfer your balances over, and don’t run up your balance(s) any higher. Higher credit line with the same utilization (CC balances) equals a lower utilization percentage, which is a good thing for your credit score. So if you can benefit financially it’s probably a good idea to go ahead with applying for another 0% CC.

      Reply
  15. Tim

    Hi. I’m a college student who’s about to graduate. I’ve got 2 cards open with a credit line of $1750 and I’ve got $1600 on the cards. Current apr is about 14% each. I always make my monthly payments but my cards have been lingering near the maximum for about a year. Would it be beneficiary to open a 0% apr card and transfer all the balances to a new card? I don’t really need the larger credit line but would it help my credit score to have a lower debt percentage?

    Thank you!!

    Reply
    1. admin Post author

      Tim, yes it would absolutely help your credit score to have a lower debt percentage, but keep in mind once your CC’s are nearly maxed out, especially without a long established credit history, it can prove to be very difficult to obtain any kind of new credit, including a credit card. You may want to try applying for a new CC as you mentioned, but don’t be surprised if you come up empty handed. High credit card balances usually send creditors running for the hills. If you are unable to obtain a new balance transfer credit card, you could try asking your current card issuer to raise your credit limit. But again don’t be surprised if your request is denied. If that happens, best thing to do is just work on paying down your balances and monitoring your credit score to see how it changes as your balance shrinks. Good luck!

      Reply
  16. Marc

    I have one credit card “A” that is 75% maxed ($9,000 of $12,000 line). I have had this card since 1998 without ever making a late payment. Card “A” interest rate is 7.9%

    I have another credit card “B” that I have had for a while but ALWAYS have paid off every month. It receives extremely rare use.

    I have two other store cards (Sears & Home Depot) that I NEVER use and only signed up for in order to get a store promotion. They’ve been used once each but remain open. They also have zero balances.

    I receive pre-approved offers every day from cards offering 0% for 21 months on balance transfers. I am considering transferring my entire balance from Card “A” over to this new card in order to save a lot of money on interest. However, the interest rate on this card after the 21 months is 12.99%.

    I would like to save the hundreds of dollars in interest over those 21 months, and the $9,000 should be paid off by the end of that time. However, I’m concerned that opening this account and transferring the balance from Card “A” would hurt my credit score (which is 800+ right now).

    Any advice?

    Reply
    1. admin Post author

      Marc, it sounds like you have excellent credit and have made good choices in the past regarding your credit. My advice would be to go ahead and obtain the low interest card if you have determined that it’s a good financial decision, and to me it sounds like it is. The hit your credit score will take from opening the new account will be very light anyway, and your increased total credit limit will help offset that ding. It sounds like with your credit, you will have no trouble getting approved for such a credit card.

      To be honest even if your score takes a 10 point hit from opening the new account, you will still have an excellent credit score, so it shouldn’t make a significant difference in terms of qualifying for the best interest rates on auto loans, mortgages, etc.

      Reply
  17. Kirstin

    I have a credit card that I share with my mother (she is the primary on the card…but it is my card and only I use it and make monthly payments on it). The credit line on it is $29,000 and through college and afterward I managed to rack up about $6,500 on it. To lighten the burden on her credit, I transferred $4,000 of the balance onto a new Discover Credit card. This new card is maxed out because I transferred over what I was approved for.

    I have run into the problem where as soon as I make a payment on my Discover Card, I turn around and spend that money to make ends meet. I have not paid this card down at all in the 6 months that I have had it. Right now, I have a $5 balance on it.

    I have excellent credit, I have never paid anything late in my life, and now I am freaking out that this card is going to ruin everything that I have built. I have a brand new mortgage, student loans, furniture and electronics financed through a few places, etc.

    What should I do with my Discover Card balance? Should I request a balance increase? Should I transfer some of the funds onto a new card?

    Please advise!

    Reply
    1. admin Post author

      Kirstin, I assume when you said that you have a $5 balance on your Discover card, you really meant that you have $5 in available credit on that card. I would definitely ask for a balance increase on that card, without knowing any other details it’s tough to predict the outcome of that request, but it’s definitely worth a try as it would help your debt-to-credit ratio, unless of course the increased credit line will tempt you to run up a higher balance, in which case it may not be the best idea. However, you mentioned that you are an authorized user on your mother’s card, which has a $6500 balance and a $29,000 limit. That would put the utilization percentage on that card at around 22% which is not bad at all. Overall if you add up the balances and limits on both of those cards, your utilization percentage sits at around 32%, which is not too shabby either. You’re worried about this debt to limit percentage ruining your credit, but if both accounts are reported to the credit bureaus under your name, you should be ok. Ideally you want your total utilization to stay under 25-30%, but if it’s slightly over that it’s not going to destroy your credit.

      Now having said that, if you were to take your mother’s CC that you mentioned, out of the equation, then yes your credit score will take a plunge with your one remaining CC pretty much maxed out at nearly $4000. So if your mother plans to remove you as an authorized user on that account, then you have reason to worry. Otherwise obtaining more credit probably isn’t going to significantly improve your credit score. Hope this helps, good luck!

      Reply
  18. Harry

    I wanted to get a bank loan to pay off my credit cards for 9.9%. I owe $27k and pay from 9.9 to 14.26 %. My debt to income ratio prevented the loan approval. I have never been late on any payment for the past 13 years. Excellent credit score, right? Such a loan would be $583 a month, I am now paying $1000 a month. Should I keep trying to get a bank to loan me the money?

    Reply
    1. admin Post author

      Harry, I have been in your shoes and in my case once I was already up to my eyeballs in CC debt, no lender wanted to go anywhere near me. I won’t tell you not to keep trying to obtain a loan to pay off your CC debt, but what I will tell you is it’s unlikely you will be able to get such a loan with an interest rate lower than what you’re currently paying. Once a person has high CC balances lenders go running for the hills. Also, every time you apply for a loan, the lender will request your credit report and score, which is a hard inquiry and can lower your score even further. My best advice without knowing all details is to work hard on paying down your current balances and monitor your credit score to see how it changes as your balances go down.

      Reply
  19. Greg

    Hi,

    I was wondering if when you make a payment on your credit card if the credit card company applies the payment to your higher interest rate debt first or do the apply it to the lowest? For example, I have a CC that I have 2000$ on that is currently 12.99% APR (Card A). I have another CC (Card B) that has 1500$ on it. Card A just offered me a 0% APR on balance transfers for a year. If I take the transfer and make payments on Card A will the payments go to the 0% promotional APR first, or will the payments be applied to the 12.99% APR debt first? Thank you in advance for your response.

    Reply
    1. admin Post author

      Greg, Excellent question, and the answer comes with some good news. Effective Feb. 22, 2010 a federal credit card reform law, enacted in May 2009, requires that credit card companies must apply your entire payment, minus the required minimum payment amount, to the highest interest rate balance on your card. Before this law was enacted, CC companies could allocate your payments how they saw fit, even if it was applying your payments to the lowest interest balances first.

      So this is how it should work now, say you make a $500 payment… first it’s applied to your minimum payment, then what’s left over is applied to your highest interest balances. So in your case the rest will be applied to your 12.99% APR debt. You can read more about this topic here.

      Reply
  20. Michelle J.

    Hello! I opened 2 secured cards 6 months ago in order in rebuild my credit and its working. I then got an offer for a Discover card and accepted it. My score has since gone up another 20 points. My average monthly balance is 10-25% of my total credit. I just received an offer from Chase diamond preferred with a 0% apr for 2 years. My goal is to raise my credit score so will accepting this offer benefit me? Thanks!

    Reply
    1. admin Post author

      Michelle J., accepting the 0% for 2 years CC offer you mentioned and transferring your balances, If it makes financial sense to you, may be a good idea even though it’s not really part of your “raising credit score” goal. Unless you have been applying for a lot of credit recently your score is not likely to change much one way or the other, since the higher credit limit usually offsets the hit your score takes from the hard inquiry and the opening of a new account.

      Reply
  21. dt

    How long does a “hard” credit inquiry affect your credit? For example, if I applied for several cards 13 months ago, is that still affecting my credit score? Thanks.

    Reply
    1. admin Post author

      dt, Hard inquiries are supposed to stay on your credit report for 2 years. However, recently I’ve read that FICO only considers them within the first year, and since you mentioned it’s been 13 months since you applied for a credit card, those inquiries should no longer be affecting your FICO credit score (the score that matters). Also keep in mind (for next time) that a hard inquiry, while not good for your credit score, doesn’t typically have a big effect on your score anyway. Probably in the 5-10 point range, for some this may be a significant difference, for others, not so much. Hope this helps!

      Reply
  22. CT

    I currently have 2 credit cards. One with Chase and one with Bank of America. I only have about $9,000 balance combined with both and my total limit combined is about $35,000. I was thinking about taking out another Chase card, that would be 0% interest for 12 months, and allow me to pay this off. The card is also a 1% cash back… Would that effect my credit negatively; to open another Chase card? Would it be advised to close the old one? I have pretty good credit now, so I don’t want to lower my score. (it is usually above 750) Thanks!

    Reply
    1. admin Post author

      CT, Yes your credit score might take a slight hit by opening a new account such as a credit card. But if you have determined that it would be in your best interest to do so, the effect on your score would only be temporary and minor. I would recommend keeping your other credit card accounts open, as this will look better on your credit history to have older established credit accounts open and in good standing, and also it would provide you with a higher total credit limit, which will help your credit score.

      Closing your old credit card accounts is not usually a good idea, especially if you have had the account for several years. If you close accounts like those, your credit age could look younger, which is not a good thing for your credit score. If you decide to close one or more of your old accounts, try to keep the oldest accounts open, the older the account the better. But as a general rule, try to keep all old accounts open, even if you don’t use them. If you find yourself tempted to use those accounts when you would not otherwise, consider cutting up those cards, that way there’s no temptation to run up the balance on impulse purchases. Another idea would be to put the card(s) in a bowl full of water, and freeze it. That could help curb those impulse purchases but also leave the card intact in case of an emergency (you could thaw the card out and use it if absolutely necessary).

      Reply
  23. Lynn

    I have a home depot card that is inactive because I’ve been out of the country for the past three years. How will reactivating my card affect my credit score? Is it best to keep my old account number or apply for a new card? Next year I plan on buying a house. Reactivating this account, I’m hoping, will improve my score. I plan on using this credit card after I purchase my house. Thanks.

    Reply
    1. admin Post author

      Lynn, I’d recommend, if possible, to reactivate your home depot card. If there was a way to reactivate it instead of applying for a new card, you would have the benefit of that account having a longer history, 3 years instead of brand new. I don’t have any direct experience in reactivating a card like that, so I can’t really comment on whether you can do it or not, but I’d try that first before applying for a new one, even if you don’t plan to use it much, it would look good on your credit report. Good luck!

      Reply
  24. angie

    Ok, don’t have time to read much but am curios, for example, I have an offer already from an account (credit card) I already have had open for a few years. They are offering me a no -fe balance transfer and I would put about $1230 on the card, would that affect credit negatively?

    Reply
    1. admin Post author

      Angie, simply transferring a balance from one card to another shouldn’t affect your credit score either way. No matter how you look at it, unless your limit on one card is being reduced, your over all utilization percentage should remain the same despite which cards you have the balances on. So in short, no, transferring a balance from one existing account to another existing account should not negatively affect your credit score. If you’ve done the math and determined that it’s in your best interest to do the balance transfer, then it’s probably a good idea to go ahead with it.

      Reply
  25. John

    If I have 3 credit cards (low limits $900-$3000) with perfect payment history over the course of 3-5 years, with each card with balances of roughly 87-95% utilization. All other debts (car, rent etc) paid on time always. Will the high balances kill my credit score or is it possible to improve since my history is perfect?

    Reply
    1. admin Post author

      John, yes the high balances will kill your credit score, high CC utilization percentage equals big hits to your score. The best and quickest way to improve your score is probably to work hard on paying down those balances, I always recommend people sign up for one of the credit monitoring services mentioned here and monitor your score as you pay down your balances. CC accounts are typically updated once a month when the statement is sent, so if you are able to pay down your balances on a monthly bases you will see quick improvement in your credit score and you can watch how it changes as time passes and you will be able to see what triggered those changes. I know this is probably what you wanted to hear, but other than paying your accounts down there’s not a lot you can do unless you can get your CC issuers to raise your credit limits. You might want to try that, but don’t count on it since your balances are already so high.

      Reply
  26. Raquel

    I have been actively trying to improve my credit score for the last few years. I was around 620 and when I applied for a personal loan at my credit union yesterday, my score was 737. I have one credit card (4,000 limit open since 2005) with a balance of $2900 being charged at 19.99 percent. The credit union is offering a 9.9 percent card and said I should apply for their card and one condition could be that I pay off and close the other card. The credit union rep said since the card was only from 2005, it would not be a negative on my credit to close it. Wouldn’t it be better to keep the old card (paid off and keep it at 0 balance, charge at least once a year and pay the balance off) and the new card? Or is it okay to close the old card?

    Reply
    1. admin Post author

      Raquel, I would definitely recommend keeping the old card open and putting some charges on it occasionally (just to be safe, since I’ve heard of CC companies closing unused accounts after a period of no activity). If you had just opened the card in the past year, it might not make much difference on your credit score, but closing an account which is now at least 6 years old sounds risky. The older your accounts the better, and 6 years is not exactly a short period of time.

      Reply
    1. admin Post author

      Taylor, if you ask for a credit line increase, your CC company may want to pull your credit report before granting your request. If they do, it would ding your credit score a little as all hard inquiries on your credit will. However, if you are granted the credit line increase, and it benefits your credit utilization percentage enough (debt to total credit limit ratio), it could definitely be worth it.

      The ill affects the inquiry has on your credit report will diminish with time, but f you are able to significantly raise your credit limit on your credit card, the long term benefits would most likely outweigh the ding your credit score took in order to get it done.

      The ding your credit score will take from the inquiry is probably in the single digits, so it’s not a huge loss anyway.

      Reply
  27. Beth

    thanks for the great advice – it’s difficult to learn how this credit card game is played. The rules keep changing.. great site.

    Reply
  28. Dawn

    I have pretty horrible credit already and a credit card that I am paying of that is closed. The interest rate is autrocious. I just opened a new credit card account explicitely for the purpose of increasing my credit to dept ratio and taking advantage of 0% balance transfer. In your opinion s that a mistake ?

    Reply
    1. admin Post author

      Dawn, did the new credit card account raise your total credit limit significantly? If so, then it may have been a smart move especially considering the 0% balance transfer opportunity. Sometimes even if something like this could temporarily ding your credit score a little, it may be worth it if your savings is significant with the lower interest, especially as mentioned before, the increased credit limit could help offset the damage to your credit score.

      Reply
  29. Kim C.

    I guess I need to add my intial..I see another Kim here! Should I give it back the cc since I never used it ?? Is that possible???

    Reply
    1. admin Post author

      Kim C., I don’t think you can just refuse the credit card account after it has been opened and cards have been sent to you. You can close it though, or just keep it open and try again somewhere else. I’ve had that same thing happen to me, applied for a low interest card only to receive one with a high rate in the mail. In my case I was not able to obtain one with the low or zero interest due to my poor credit at the time, so I just had to deal with the high interest until I paid it off, but I certainly hope you have a better result than I did.

      Did your cc balance already get transferred to the new card, or is that yet to come?

      Reply
  30. Kim

    The card $5200 with a 2900 balance @ 15.99 I have a credit score of 786. I ask every month to lower percentage rate & they say that is all they have to offer right now. So I saw a chase card @ 0% for 6 months and %9.99- %21.99 after I applied & got the card they gave me a 17.99 card & a higher balance of $7200. I don’t want that deal..what can I do????

    Reply
  31. Amy

    I do also have a $10,000 GoldOption loan still open but paid off, but again with a horrible rate. I do not know the difference between this and a credit card, as they sent me a card to use if I wanted, but is a type of revolving credit.

    Reply
  32. Amy

    Have one credit card maxed (17,000) with high interest rate (27%). My credit rating is 722 and was able to get one card to transfer to with a $4000 limit. Would I kill my credit rating by trying this 3 more times? I can pay the current card off in 3 years by paying $731 a month. But if I can transfer these, and split the payments to $175 per card, I could have them paid off in 24 months, which would include the transfer fee (the $4000 limit card has 0% for 21 months). Ideas?

    Reply
    1. admin Post author

      Amy, that’s a tricky situation because it is true that opening new accounts, and the hard inquiries on your credit that comes along with that, will lower your score slightly – maybe in the neighborhood of 10 points each. If you are approved for another credit card with a fairly high balance, this would increase your total credit limit on your revolving accounts, and may help offset the hit you took from opening the new account in the first place.

      I would take into consideration any future plans to purchase a home, car, or any big ticket item like that and weigh your pro’s and con’s for the possible ding your credit score would take compared to the savings you could enjoy by transferring balances as you mentioned. If you do not plan to do any of these things within the next year or two, then the ding to your credit score probably won’t have any effect on you.

      To answer your question, no it wouldn’t “kill” your credit score to do what you are considering, but keep in mind if you hit a brick wall while applying for new cards to transfer your balance to, try not to keep applying for more and more, if you are being turned down by all of them. At that point just focus on paying down your balances.

      The good news is the quicker you can pay down your credit card balance, the quicker your score will go back up.

      Reply
  33. bill

    Is it correct that your credit score is based on your total debt percentage and that the agencies do not take into consideration which or how many cards are carrying the debt? For example, if I have 4 cards and one of those cards has the lowest interest rate, thus, I transfer all the balances to that one card, it won’t have an affect on my credit score? I’ve read somewhere that you should spread it out amongst your cards but if the other cards are at a higher rate, that doesn’t seem to be prudent.

    Reply
    1. admin Post author

      Bill, from my experience, as far as your credit score goes, it doesn’t matter if your balances are spread out among many cards or consolidated into one, as long as your debt to credit limit percentage is the same. It’s about overall revolving credit (credit card account) management. If there are people who say it’s best for your credit score to spread out your balances over several credit card accounts, I’d love to see the proof. Drawing from my personal experience, I don’t agree with that.

      Reply
  34. Chloe

    I love you. This is really good advice, and people asked the same questions I wanted to know…. specifically Kim.

    I have good/great credit, about 750. So I want to make sure I keep my score high…. I have 2 main credit cards. One with a $6500 limit, the other with a $5000 limit. I’m at about 87% utilization on my $5000 Wells Fargo card, and they have me at a 15.99% interest rate (Yozers, right!!!) But then, here comes Chase to the rescue with a 0% balance transfer (10 months, it was initially 1 year) – or- 1.99% balance transfer ( 1.3 years, was initially 1.5 years) -or- 4.99% balance transfer (1.4 years, was initially 1.6). Soooo, I’m opting for the 0%, but I was wondering about the affect it would have on my credit so I looked up a few articles and they generally same the same thing, though there are some differences…

    The main similarity I found in each article was about credit utilization: Which everyone states to just be sure to keep the balance transfer account open. Question: Do I have to tell them to keep the card open or will it just remain open?

    The difference is some people say its better to have a $1000 debt on 3 cards (with $3000 limits), than a $3000 debt on one card (with a $3000 or $3500 limit). But you’re saying that at the end of the day it doesn’t really matter? (since the utilization ratio is the same).

    Another question, are there fees on both cards when a balance is transferred ? Or just one?

    Thanks!

    Reply
    1. admin Post author

      Chloe, in my experience it does not matter if you have 3 credit cards all with balances, or just one, what matters is the credit utilization percentage (balance to total credit limit percentage).

      The credit scoring systems look at how you manage your credit cards (revolving credit). They love to see zero balances on your credit cards, but since that’s usually unrealistic, as low as possible is always best. I would recommend having as few credit card accounts as possible.

      Typically when you transfer balances there’s no need to close the account you are transferring the balance from, unless you request that it be closed, it should remain open without your request. As you mentioned that is best for your credit score.

      As far as the transfer fees, you will need to find that out from your card issuers.

      Reply
  35. Kim

    I have 3 credit cards. One is pretty much maxed out at 92% of the credit line, the other 2 are at about 13%. Both of my low balance cards are offering 0% balance transfers right now. Should I transfer the full balance of my higher rate, maxed out card to one of the 0% cards (this move would put me at about 90% on that card), or should I spread a partial transfer between the two 0% cards, leaving some on the higher rate, maxed out card? This would put me at about 39% utilization on the two 0% cards and leave me at about 49% on the original card. I would like to keep from lowering my credit score, but I’m not sure if those percentages on the 3 cards would be better, or if 90% on one card and nothing on the other two would be best. If it makes any difference, the transfer fees will take me 3-4 months to make up. Thanks for any help you can offer!

    Reply
    1. admin Post author

      Kim, since you already have the credit card accounts in question (vs. obtaining new accounts for the purpose of the balance transfer), no matter which card(s) you keep your balances on, if your total revolving credit line utilization percentage remains the same, it won’t make a difference on your credit score.

      However, you mentioned the balance transfer fees, so that would increase the percentage slightly. But if it’s a significant savings in interest, I would recommend choosing whichever option that could save you the most money and help you pay down your balances quicker, which is really your main goal here. But again, don’t worry about which option would be best for your credit score, you can move your balances all you want between your existing cards, your overall credit worthiness should remain the same regardless.

      Reply
  36. Michelle

    If I have a credit card that is maxed out at its limit but am interested in transferring my balance to a 0% intro APR in order to pay it down, are most offers likely to transfer the whole balance? Because if they only transfer part of the balance, I’m then left with 2 payments instead of one right?

    Reply
    1. admin Post author

      Michelle, it depends on your situation. When I was in that same position, I could not get approved for a zero percent credit card to transfer my balance to. I applied for several, only to be denied each time.

      If you currently have only one credit card, and it’s maxed out, it’s unlikely you will be approved for another credit card with a significant credit limit, unless you have a good, established credit history. Credit card companies love to give credit to people who don’t look like they need it, and unfortunately, sometimes the people who do need it, get the short end of the stick.

      You can definitely try applying for some zero interest cards, but unless you have outstanding credit, it’s likely that you will need to pay down your balance to somewhere around 50% (or lower) of your credit limit before creditors will be willing to extend you more credit.

      That was my experience, but I certainly wish you the best and hope you have better luck than I did!

      Reply
  37. Ana

    Thank you so much! When asking for a credit limit increase, if they tell you that they are going to need to run your credit, does that have the same effect as your credit getting run when applying for a new card?

    Reply
    1. admin Post author

      Ana, it really depends on the situation. If you call and ask for a credit line increase and they grant you the increase without asking detailed financial/income questions, then they probably won’t check your credit. But if they ask for more personal info, such as employer and income info, monthly mortgage and other specifics like that, then they will most likely check your credit which would have the same adverse effect as applying for a new card. However, the damage this will cause is minor and will go away with some time.

      Depending on the balance you are carrying on your current card, if it is high, I’m guessing they will check your credit first, but it’s still probably the best place to start.

      They love to give their customers more credit when they don’t look like they need it, so it makes sense to expect it to be a little harder if it appears that you actually need the extra credit line.

      Reply
  38. Ana

    If we need more available credit (about $3000), is it better to ask for a credit limit increase on a current card, or open a new credit card? My assumption would be that a new credit card would come with a higher limit than the amount that a current creditor would be willing to increase your credit line by, therefore creating a lower debt ratio overall, but I’m not sure which would reflect more poorly on the credit report?

    Reply
    1. admin Post author

      Ana, I would first try asking your current credit card company about increasing your line of credit. It would probably look better on your credit report that way since you would not be opening any new accounts with hard inquiries on your credit report.

      If they deny your request, you may have trouble obtaining a new credit card with a credit line as large as you mentioned. But you can certainly try, just keep in mind every time you apply for an account, they will check your credit, which will ding it a little. If you apply for several cards and are turned down, each one if those will ding your credit as well. So try once or twice and if nothing happens, you may want to think about working on paying your current card down before applying for more.

      I was in the same boat years ago, and didn’t have any luck, had to work on paying down the accounts I already had first. But your situation may be different. Good luck!

      Reply
  39. Adam

    when you apply for a new credit card, will the credit card company tell you the new limit? Do they tell you the limit before you tell them how much you want to transfer over?

    Reply
    1. admin Post author

      Adam, unfortunately in my experience they do not tell you your credit limit before they approve your credit card account for a balance transfer. But the good news is you can keep your old account open (the one you are transferring the balance from) which will improve your balance to credit limit ratio. If possible just leave the old account open with a zero balance. If you are tempted to use the credit card, just cut the card up, that way you have the benefit of the increased credit limit without the temptation of running up more debt.

      Reply
  40. Damy

    Great advice and right on the money too! I was in the same predicament and came close to closing my original credit line (with a higher credit line). But after I read the article, I was better informed and made a great decision about leaving both credit cards open. My debt percentage is now 22% of my total credit line and my score was not affected negatively.

    Thank you.

    Reply

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