|
Articles » Fico Score | | Will Transferring Credit Card Balance Affect Credit Score? |
|---|
If you are reading this article you are thinking to transfer a credit card balance to a 0% APR credit card or an APR lower than your current credit card’s. At the same time you are wondering if this will affect your credit score, which you have spent time and energy on, and you want to make sure you don’t jeopardize it in any way.
The simple answer to your concern is that it all depends on the length of time you plan on doing this. If you do “card-hopping”, in other words if you switch to credit cards with lower APRs frequently, it will affect your credit in a bad way. It might not affect your credit score but it will be on your credit history and future lenders can see that you’ve been doing this for a while, and therefore will categorize you as a risky borrower. Put yourself in their shoes. Seeing a borrower changing his lender all the time makes you wonder that he/she is not a responsible borrower and instead of putting his/her credit in order, that person tries to postpone the problem by borrowing from another lender.
Also you should know that when you open a new credit card it temporarily lowers your credit score or fico score. At the same time, if you leave the old account(s) open, available credit will usually offset the ding. The simple rule is that you don't want to appear "maxed out" on your credit report. There is one ratio which is calculated based on available credit versus credit used. This ratio affects 30% of your fico score calculation , so be careful on this.
The bottom line is that if you have not done this before and if it will save you a considerable amount of money, then you should go ahead and do it. However, remember to leave the old account open. This is because closing the old account will bring your total available credit down, which will consequently increase your debt to credit limit ratio. Try to avoid doing this in future and pay your payments on time. Then you can close your old credit card when your balance is less than 35%-40% of your available credit.
Comments
Johny March 12, 2009 10:09:36 PM 10:09 PM For a while lets think that changing credit cards is good and it allows us to spend more than our old card. But the fact that our credit history is being affected always ignored or we will be ignorant about that. Like you said it might not reduce the score but it will hurt badly the history of our credit which is essential when we borrow money.
Brandon March 14, 2009 07:52:42 PM 7:52 PM Whenever we open a credit card it shows up on our credit report. We often do this to get one with lower interest. But hopping of credit cards is not a such good idea. But if the financial situation is very bad then we can cancel the previous card and then open a new one.
|
|
|
|
