Credit Card Balance Transfer Might Lower Credit Score

A credit card balance transfer is done usually for the purpose of consolidating credit card debt and saving money on high interest credit cards. Transferring balances to a credit card might temporally lower your credit score across it creates instability in your credit report.  Any time that there is a major change in the credit situation of the consumer the credit score usually dips.

The same thing happens if you take out a mortgage loan.  Although our mortgage is immensely beneficial to a credit score the positive effect may not happen instantly and the credit score may even fall before going up.  This is because the credit scoring model considers stability and regularity of payments when calculating the credit score.  Whenever you take on a new debt it is unclear as to how you are going to repay it.  For the same reason of transfer to a credit card affects your credit score negatively to the time you have made the first few payments and showed stability.

Another reason why the credit score might suffer his due to the debt utilization ratio. This will only happen if you close the other credit card accounts that you are transferring the balance from When you transfer other talents is on to one credit card you are increasing the balance on that particular credit card.  Having a high balance as opposed to the credit limit available increases the debt utilization ratio which in turn has a negative impact on your credit score..  If you do not close the other credit card accounts then your debt utilization ratio should not change and will have no effect on your credit score.

A credit card balance transfer is beneficial if you are transferring a balance on to a credit card that has a lower rate of interest as opposed to the other cards. Also putting all the balances on a single card will allow you to make a single consolidated payment every month.  Both these things combined, the reduced rate of interest and the convenience of making a single consolidated payment may help you get out of debt faster.  As you keep paying off the consolidated amount on the credit card imbalance will reduce and this will improve your credit scores as well.

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