Credit Scores & Credit Monitoring What To Do About Bad Credit How Does a Balance Transfer Affect Your Credit Score? Know the Pros and Cons of Moving Your Balance By LaToya Irby LaToya Irby Facebook Twitter LaToya Irby is a credit expert who has been covering credit and debt management for The Balance for more than a dozen years. She's been quoted in USA Today, The Chicago Tribune, and the Associated Press, and her work has been cited in several books. learn about our editorial policies Updated on September 30, 2021 Reviewed by Khadija Khartit Reviewed by Khadija Khartit Twitter Website Khadija Khartit is a strategy, investment, and funding expert, and an educator of fintech and strategic finance in top universities. She has been an investor, entrepreneur, and advisor for more than 25 years. She is a FINRA Series 7, 63, and 66 license holder. learn about our financial review board Fact checked by Hans Jasperson Fact checked by Hans Jasperson Hans Jasperson has over a decade of experience in public policy research, with an emphasis on workforce development, education, and economic justice. His research has been shared with members of the U.S. Congress, federal agencies, and policymakers in several states. learn about our editorial policies In This Article View All In This Article How Your Credit Score Is Calculated How Balance Transfers Can Hurt How a Balance Transfer Can Help The Bottom Line Photo: Jamie Grill / Getty Images A credit card balance transfer can be an enticing offer if you're weighed down by a large, high-interest balance. Almost every major credit card issuer offers balance transfer promotions that will allow you to pay no interest on your balance for at least six months or give you other rewards. Before you jump on one of these deals, though, you should carefully count the costs. Balance transfers can affect your credit score—so make sure you know what you're getting into. How Your Credit Score Is Calculated Transferring balances can have an impact on your credit score. There are five factors that affect your credit score, three of which are particularly relevent when it comes to balance transfers: Payment historyLevel of debtAge of creditMix of creditRecent credit applications How Balance Transfers Can Hurt Your Credit Score Credit card balance transfers can affect your credit score in the areas of level of debt, age of credit, and recent credit applications. This can result in a temporary lowering of your score. Balance Transfers and Credit Utilization Your credit score considers your credit card balances in relation to their respective credit limits—this ratio is known as your credit utilization—and your total credit card balances compared to your aggregate or total credit limit. This accounts for 30% of your credit score. The higher your credit utilization, meaning the higher your balances are compared to their credit limit, the lower your credit score will be. If you transfer a balance to a credit card with a lower credit limit than the previous card, your credit utilization percentage for that card will go up and you could lose credit score points. Fortunately, you can regain lost credit score points by paying down your balance quickly. Ideally, your credit card balances should be below 30% of the credit limit. Transfers Lower the Credit Age Age of credit measures how long you've been using credit and accounts for 15% of your credit score. This part of the credit scoring calculation averages the length of your credit accounts and the age of your oldest account. Adding a brand new card into your credit mix will automatically bring down the average age of your credit. Transferring your credit card balance to an account that's already open won't damage your credit score in terms of credit age. However, if you open a new credit card, your average age of credit will decrease. Hard Inquiries Automatically Ding Your Credit You probably know that each credit inquiry makes a small dent in your credit score. Since recent credit applications—along with new cards you've actually opened—make up 10% of your credit score, applying for a balance transfer credit card could cause your credit score to drop. Note Only the application affects your credit score, not the approved or denied outcome, but opening several cards in a short period will bring your credit down. FICO, developers of the widely-used credit score, says that inquiries typically only hurt a credit score five points or less depending on the other information in your credit report. The other good thing is that only inquiries from the past 12 months will affect your credit score. How a Balance Transfer Can Help Your Credit Although your credit score might take a hit when you transfer your balance, that doesn't necessarily mean it's a bad move. There a few ways it may ultimately improve your credit in the long term. More Accounts Can Lower Your Utilization Although you might have a higher credit utilization ratio on your new card, your overall utilization rate will go down if you don't use your cards more than you have been. Since your overall utilization rate is one of the major factors that affects your score, this could bring down your score after a while. Note Don't purchase more on credit simply because you have more cards. It's important to charge only what you can afford to pay off—and to keep your utilization rate low. You Might Pay Off Your Balance Faster The primary motive for transferring a balance is often to reduce the amount of interest that you're paying. If you are carrying a $5,000 on a credit card with a 20% APR, for instance, you'll pay $511 in interest to pay off the balance over 12 months. If you transfer that balance to a 12-month, zero-interest card, you can apply that extra $511 toward paying off the balance faster. Paying off your balance more quickly means you'll be using less of your credit, which will ultimately help your score. Keep in mind, though, you may have to pay a balance transfer fee, which would chip away at your savings in interest. The Bottom Line While transferring a balance could impact your credit score, you can regain any lost points by paying on time, reducing your balance with regular above-minimum payments, and waiting before making any new credit card applications. Don't rule out a balance transfer because of the potential impact on your credit score. Weigh the cost of the balance transfer vs. the cost of not doing one to help you make the best decision. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. Fair Isaac Corporation. "What's in My FICO Scores?" Fair Isaac Corporation. "What Is Amounts Owed?" Experian. "What Affects Your Credit Scores?" Fair Isaac Corporation. "What Is the Length of Your Credit History?" Fair Isaac Corporation. "What Is New Credit?" Fair Isaac Corporation. "Credit Checks: What Are Credit Inquiries and How Do They Affect Your FICO Score?"