Do Balance Transfers Hurt Your Credit Score

Whether a balance transfer may help or hurt your credit score depends on whether you open a new balance transfer card or use an existing card, as well as how you use the balance transfer to pay off existing debt.

Let’s take a deeper look into how balance transfers can affect your credit.

Using an existing card for a balance transfer

Different credit scoring models weigh factors like credit utilization and payment history differently. This means that the impact of transferring a balance may vary depending on the scoring model. In general, however, transferring a balance may have the most immediate impact to your credit utilization.  

Credit utilization ratio

Your credit utilization ratio is the percentage of your revolving credit currently in use. A lower credit utilization ratio is generally better for your credit score.

If the relevant credit score model takes your total existing balances and divides them by the combined credit limits of all accounts, transferring your balance to another open card may have no effect on your credit score. Because you are moving a balance to another card without adding any new credit limit or new debt, the amount you owe divided by your available credit limits will stay roughly the same after the transfer. Balance transfers generally come with balance transfer fees (usually a flat fee or a percentage of the balance you’re transferring, whichever is higher) and that will be added to the balance.

When transferring a balance, keep in mind that some credit score models may also consider the utilization ratio on your individual credit accounts and factor in the account with the highest utilization. For example, if you used all the available credit on one of your credit card accounts, the high utilization ratio on this account may have a negative impact on your credit score. Additionally, credit score models may consider other data on credit utilization, such as your average utilization ratio.

Opening a new card account for a balance transfer

Opening a new balance transfer credit card may help your credit score by increasing the overall amount of credit you have available, improving your credit utilization ratio.

However, a new card will lower your average account age, which makes up part of your credit score. And if you apply for several balance-transfer cards at once, that can be a red flag to creditors. When you apply for a credit card, the credit card company will typically request to review your credit report as part of the approval process, and the request is recorded as a hard credit check or a hard inquiry. This can lower your score by a few points. A hard inquiry can stay on your credit report for up to 2 years and affect your credit score for up to a year.

Repeatedly transferring balances

You may see low introductory APR offers for balance transfer credit cards as a way to help delay interest from accruing against your debt. If that window is about to expire, but your debt hasn’t been paid down, you may think that moving the debt again to another low intro APR card can buy you more time.

But with each application for a new card, your credit score may take a minor hit. And multiple requests within the same year can negatively impact your credit score to the point where getting approved for another balance transfer card may become more difficult. Eventually, your debt may have no place to land without earning interest.

Because of this, it is best to use low introductory APR offers as a window for you to significantly pay down your debt, not to simply avoid interest payments for a while.

How to potentially help your credit score with balance transfers

Here are some steps you can take to use a balance transfer card to pay off debt and potentially help improve your credit score.

Find a new credit card with a low introductory APR

To maximize the impact of a balance transfer, consider opening a new credit card that features a low intro APR. While your overall account age will drop, you may be able to get more credit while putting a pause on higher interest charges.

Apply for only one card

Decide on the balance transfer card you may likely qualify for and apply just once. Multiple credit applications can negatively affect your credit score.

Use the card's low introductory APR period to pay down debt

Balance transfer cards typically offer low interest rates on balance transfers for a limited amount of time. Use this low-interest period to make as big of a dent in your debt as possible to help you avoid higher interest rates on your debt when the introductory period expires. Paying off debt can reduce your credit utilization and help improve your credit score.

Make card payments on time

When you transfer a balance, you’re still required to make the minimum payments on time each month. If you fail to pay the minimum on time, you may lose your introductory rate. This is usually detailed in the terms and conditions of your card.

Know when your interest rate will increase

After the introductory period for balance transfers ends, your interest rate will typically go to the standard rate for purchases. Your unpaid balance will then be subject to this higher rate - which can make your monthly payments higher. Before you commit to a new balance transfer card, understand what the APR will be when the introductory rate expires and how long the introductory rate period lasts.

Disclosure: This article is for educational purposes. It is not intended to provide legal, investment, or financial advice and is not a substitute for professional advice. It does not indicate the availability of any Citi product or service. For advice about your specific circumstances, you should consult a qualified professional.