Everything Is Dependent
Transferring a balance to a lower interest credit card can certainly help you save money, assuming the fees put on a transfer don't outweigh the interest savings, but the effect on your credit score is not as easy to figure out.
While many people promote transferring balances as an easy way to increase your credit score, it isn't always a good idea. Everything depends on your balances and limits.
It May Decrease
The actual affect on your score will depend on your total debt percentage. Essentially, if you transfer debt from a card with a high limit to a card with a low limit, you may harm your score.
For example, if you have one card with a $1,000 balance and a $5,000 limit and you choose to transfer $500 to a card with a $500 limit, you'll be harming your score. In this case, you would be taking one card from a 20 percent debt percentage to a 10 percent debt percentage.
That's good for the first card, but you'll be taking the second card to a 100 percent debt percentage. The average debt percentage for the two cards then becomes 55 percent. That means you went from a 20 percent total debt percentage to 55 percent. You'd be hurting yourself as far as your credit rating goes. Of course, if this will save you money, it may still be worth it. Additionally, saving money might help you pay off a larger percentage of the debt, which will help your score in the long run.
It May Increase
On the other hand, if you are transferring from a card with a low limit to one with a high limit, you might increase your credit rating at the same time you will save yourself money.
As the example in the last case, you could take $500 off of a card with a limit of $500 and apply it to a card with a $500 balance and a $5,000 limit. In this case, you would be taking your debt percentage from 55 percent to 20 percent.
Obviously this is the ideal way to perform a balance transfer, but it's not always possible. Always consider your goals and options before you transfer a card balance.
Things to Avoid
A few things will always hurt your credit when it comes to balance transfers. Never close a credit card account that has a long standing history. Even if you transfer all of the balance off of the card and never use it, your history with the card is helping to raise your credit score.
Additionally, don't sign up for credit cards just for the sake of creating a lower debt percentage. Opening new cards will hurt your credit score, especially when you make a habit of opening too many. Lenders generally look at this as a sign that you intend to begin racking up a lot of debt--not a good thing in their eyes.
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