Do you have a question about consumer credit? You may find an immediate answer by using the search engine. If you can't find what you're looking for, please fill out the form, being as specific as possible.
Please note: The Ask Experian team cannot respond to each question individually. However, if your question is of interest to a wide audience of consumers, the Experian team will include it in a future column.
The information contained in this column if for educational purposes only and is not legal advice. You should consult your own attorney or seek specific advice from a legal professional regarding your particular situation.
Please understand that Experian policies change over time. Column responses reflect Experian policy at the time of writing. While maintained for your information, archived responses may not reflect current Experian policy.
Topics addressed on December 10, 2008:
Transferring balances shouldn't hurt credit scores
Does the simple act of making a balance transfer lower your credit score and if so how much?
Any change in your credit use can affect your score, but over time this could be a positive change. Transferring a balance from one credit card to a new card may add an inquiry to your file, which could cause a temporary, small decrease. However, you aren’t taking on new debt and, assuming you have a new credit card, you are likely increasing your available credit. This should decrease your total balance-to-limit ratio, which may increase your score.
Your balance-to-limit ratio also is called your utilization rate. It is simply a comparison of your balances to your available credit. A low utilization rate on each card and on the total of all your cards is considered a sign of responsible credit use and helps your credit scores.
An added benefit, particularly if the new card has a lower interest rate, is that you might be able to pay off the balance faster because more will go to the principle amount. That could be a great gift during the holiday season.
The trick it to not use the card you transferred the balance from, especially if you transferred the entire amount and now have a zero balance on the card. It can be very tempting to use the credit card. After all, you now have all of that credit available.
However, that will increase your debt and your utilization rate, which can make it harder to pay the balances due and will very likely hurt your credit scores.
Thanks for asking.
- The "Ask Experian" team