Is Your Credit Score Affected By Credit Card Balance Transfers

Transferring a balance from one or more credit cards to take advantage of better interest rates seems like a no-brainer right? After all, paying interest in excess of 12% on anything seems pretty high in today’s financial environment. But have you ever stopped to consider if using balance transfer credit cards has any affect on your credit score?

The truth is is that it actually does have an affect. When you open up a new credit card account your credit score will drop, on average, 5-10 points. The reasoning behind this is that people that open new accounts are more likely to be taking on new debt. Makes sense actually.

It is however, nothing to be concerned about. As long as you don’t max out the credit limit on the new card and make your payments on time, you will see your credit score return to where it was prior to submitting the credit card application.

Now here is the interesting part of the equation. Many people will jump from card to card as the 0% APR or low interest introductory rate expires. You may think this would be a red flag to the credit reporting agencies Equifax, Transunion and Expirian but in fact, they really don’t care.

Outside of your credit score dropping a few points with each new card being opened (which will quickly recover as stated above), the true measure of your credit-worthiness comes from your limit to balance ratio. It is a formula that determines how you utilize the credit that is available to you. The credit card companies may not like you jumping from one credit card issuer to the next, they refer to consumers that do this as ‘rate surfers’, but so what.

Once again the important factors here are to make sure you always pay your bills on time and try not to carry a balance that exceeds 50% of your credit limit (the all important limit to balance ratio). If you stay within these parameters your credit score will show no long term ill affects from balance transfers.