How Does a Balance Transfer Affect Credit?

Pre-Transfer Credit Score Calculation

There are five major areas that factor into a person's credit (see Resources below). The only one that will be a affected by a balance transfer is the "Amounts Owed." Within that category, the ratio of credit available to credit used is taken into consideration both on an aggregate level and individual account level.

Making the Transfer

When the balance of the original account is transferred, the balance is added to the receiving account. This means that the receiving account now has more of its credit line used than before. This makes a person's credit score lower. However, the original account now has a lower balance than before, and that makes the credit score higher.

Credit Score Settles

During the month when the balance is transferred, the credit score will either sharply decrease or increase depending on which creditor reports information for that month first. If the receiving creditor reports first, then there will be a period during which it reports having the new balance but the old account has not yet reported that balance being removed. So the overall credit will drop, and vice versa. After both companies have reported, then the overall score will settle. The net affect on credit will be small in the end.