How does transfering Credit Card Balances affect credit scores?

[mom2boys]

When it comes to transfering credit card balances from one card to another to take advantage of lower interest rates, how does it affect your credit rating?

 

[usnuzuloose]

I have a friend who kept tranferiing to o percent interest. And all you keep doing is throwing the same debt around. And what happens when you dont pay it all off by the time the offer runs out? Also they run your credit to see how your credit is. And my friend well she still has not paid off the debt. And cant understand why. Not flaming you. Jo

 

[RooRach0906]

I would like the answer to this as well. We already put medical bills on a CC because DH business is slow right now, I lost the kids I was watching before my maternity leave, and we were gonna transfer them to a CC that has 0% for 18 months so that the months his company is slow he can make smaller payments and bigger when they are busy. Also we will pay it off before the 18 months to avoid back interest charge. The CC with the 0% is in my name so I would really like to know how it will affect my credit score.

 

[mom2boys]

I have a friend who kept tranferiing to o percent interest. And all you keep doing is throwing the same debt around. And what happens when you dont pay it all off by the time the offer runs out? Also they run your credit to see how your credit is. And my friend well she still has not paid off the debt. And cant understand why. Not flaming you. Jo

Let's assume that regular payments will be made towards the account. It may not be paid in full at the end of the 0% period but the "regular" interest rate is 10% - much lower than the current rate on the cards with the debt to be transferred.

 

[Bethenny]

How would anyone, except your issuer, know that you were transferring balances?

 

[mom2boys]

How would anyone, except your issuer, know that you were transferring balances?

Credit card companies report to the credit agencies. These transactions show up on your statement with separatley stated interest calculations. I am wondering if the credit bureaus factor that in if it doesn't change your over debt to credit line ratio and you are paying down the debt every month.

 

[Planogirl]

Credit card companies report to the credit agencies. These transactions show up on your statement with separatley stated interest calculations. I am wondering if the credit bureaus factor that in if it doesn't change your over debt to credit line ratio and you are paying down the debt every month.

If you have two open accounts and you transfer a debt from one to another, I doubt that it would have much effect if any. Your debt to limit ratio wouldn't change and interest rates are not reported to the credit reports.

 

[Buckalew11]

I don't know if I'm answering correctly but I have done this in the past. I transferred 3,000 off of a card to a 0% rate card that I had to apply for (I mean, it wasn't a card I had already--I opened another CC to get the 0%) and I did not charge on that card, only paid that 3000. off. I paid it off in the 12 months time I allowed.

When we built our house and were finalizing all the $$ stuff this year, it didn't bother my credit score at all to do it that way so I think it is a good way to do it.

 

[arminnie]

My sister has done this for years - and she has an almost perfect credit score.

 

[DeluxePrincess]

We had an emergency expense that we needed to charge. I recently transferred that debt to a card that offered 0% for 12 months that I had no balance on. It did not change my credit score. I imagine that if someone just keeps transferring the debt around and not actually paying it off, it might effect the credit score.

 

[punkin]

My sister has done this for years - and she has an almost perfect credit score.

I also used to do this for years, but lately with the balance transfer fees, it is not worth it anymore. As long as it was essentially free money, it made sense, but I wouldn't pay a 4% transfer fee for a "0%" rate.

I have good credit in the high 700s.

 

[golfgal]

If it is a card you already own (which it would be rare to have one that has 0%) it wouldn't change anything really. If you open up a new card it can actually help your rating. Say you have a card with $5000 limit and you have $4000 on the card, your available credit is almost maxed out which hurts your credit rating. If you open a second card for another limit of $5000, you now have $10,000 in available credit and only $4000 used-so less than half. That will look good on a credit report. What hurts you the most on credit is late payments, judgments, liens, charge-offs and bankruptcy.

 

[LuvCuteBoys]

^^ Yes, that. UNLESS you have to apply for a ton of cards before getting approved for one.

 

[golfgal]

^^ Yes, that. UNLESS you have to apply for a ton of cards before getting approved for one.

That is true. If you apply for one card and get turned down, DON'T apply for another.

 

[Cheshire Figment]

A lot will depend on the billing cycles. Normally the balance on the account is reported to the Credit Bureaus on the day the bill is generated.

Giving two examples. In both cases you are transferring $4,000 balance from Card 1 (current balance $4,500, new balance $500) to Card 2 (current balance $1,000, new balance$5,000). Card 1 has a billing date on the 10th of the month, card 2 has a billing date on the 20th of the month.

Method one - good - do the transfer after the 20th and before the 10th. Old balance is reported as $4,500 + $1,000, total $5,500. New balance reported as $500 + $5,000, total $5,500. No changes in total or utilization.

Method two - bad - do the transfer after the 10th and before the 20th. new balance, for one month only, is reported as $4,500 + $5,000 total $9,500 which jumps utilization up by $4,000 and lowers score. And it will take several months for the score to go up again.

 

[arminnie]

I also used to do this for years, but lately with the balance transfer fees, it is not worth it anymore. As long as it was essentially free money, it made sense, but I wouldn't pay a 4% transfer fee for a "0%" rate.

I have good credit in the high 700s.

I recently did a huge cash advance with a 3% fee for about 15 months of 0% interest. I'm doing a very big remodel of my Little Rock home, and this was much cheaper than any loan I could get. I have the money to pay it off but will have to pay taxes on an IRA distribution. It works out better for me to defer the IRA withdrawal until next year.

I wouldn't risk it if I didn't know that I had the cash available to pay it off. My sister is self-employed and does this as a way of financing her business when she needs short-term cash.

I don't consider it "free" money - but a 3% interest rate on a loan is about as good as it gets.