Can A Balance Transfer Affect Your Credit Score? | CreditShout

Can A Balance Transfer Affect Your Credit Score?

By Kevin / November 13, 2015
Can A Balance Transfer Affect Your Credit Score?


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A balance transfer may seem like the answer to those sky-high interest charges that you have been facing on a monthly basis. However, is there any merit to whether a balance transfer can negatively or positively affect your credit score?

Using a Balance Transfer to Boost Your Score

Paying the debt, by transferring it to a 0% APR introductory transfer can increase your credit score.

This is because 30% of your credit score is based on the amount of debt that you owe. This includes a ratio that the credit score calculates of the available credit, to the credit that has been used. The less debt that has been used, the better it will reflect on the credit rating.

Therefore, using a credit card balance transfer to pay debt quicker is a smart move for those trying to improve their credit score, as long as the debt is paid.

However, many customers are unaware that fifteen percent of your credit score is based around your credit history, and therefore closing the account that has been paid in full may cause the credit score to decrease temporarily.

How do you avoid this? If you are able to practice responsible credit card use, than the credit card could be beneficial to gaining the maximum score available through this fifteen percent calculation.

If you do intend to keep the account open to maintain your credit score, than it is important to pay off the balance each month – do not allow that balance to become unmanageable to the point of requiring another balance transfer to cope with the high interest rates.

Avoid These Balance Transfer Traps

When transferring debt to a 0% APR for six or twelve months this allows the customer to apply payment directly towards the principal, without accumulating any interest on the base amount. If the debt is paid in full before the end of the term than the debt will have been interest free.

It is important to remember that one late or missed payment could void these introductory rates. This makes it vital that customers be diligent when managing their credit card debt.

This 0% APR could turn into upwards of 20% APR quickly if even one payment is missed.

Another trap occurs if you are looking to buy a home or finance an automobile. In this case, it is crucial to limit the credit available.

Why? Well, some lenders become weary if high limits are available to the customer. So too much credit available to you could affect the outcome of the loan application.

There is an easy solution, though. Did you know that you can contact the lender and asked that limits be decreased? So your problem can be solved with a  simple phone call to the card issuer.

The editorial content on this page is not provided by any of the companies mentioned and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are the author's alone. Additionally, the opinions of the commenters are not necessarily the opinions of this site

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