What effect will using multiple balance transfer offers have on my credit score?

September 8, 2011 10:50 AM

I recently received a 0% until 2013 balance transfer offer, interest rate to hold until Jan 1, at which point SAPR (14.99%) kicks in. I've used two of these in the past to gradually pay down my credit card debt. What effect do these offers have on one's credit rating?
posted by sideofwry to Work & Money (5 answers total)

Best answer: The only effect is that you'll be adding another open account to your report. This will decrease the average account age, and decrease your credit utilization percentage. Basically, it's a wash. As long as you're smart and diligent about it, using balance transfer offers to help pay down credit cards is a good thing. I did it in the past and it worked for me (I have had no revolving debt for years now).
posted by zsazsa at 10:58 AM on September 8, 2011

Yes zsazsa is correct; it will decrease your standing in the short run due to opening a new account and having an inquiry on your report. But the actual balance transfer - no affect. A balance transfer is literally just one company paying another that you owe. So pretty much, your balance transfer offer company sent a check for the remainder of the balance to your old credit card company.

FYI, just read the fine print to see where the interest kicks in if the balance is not paid in full by the end of the Intro period. Some will charge only the remaining balance while others will charge for the entire balance transfer.
posted by lpcxa0 at 11:01 AM on September 8, 2011

Right as zsazsa said it will only affect your credit rating the same way that opening a new credit card account would affect your credit rating, regardless of any balance transfers. The exact details of how credit scores are calculated are secret, but the fundamental components are well known. One thing that zsazsa did not mention is that opening a new credit card account will probably also reduce your average account age, which will also slightly hurt your score, but as he said it will not be a huge drop or anything. Credit Kharma has a nice simulator you can use to see how something like a new credit card would most likely affect your score if you want a decent estimate.
posted by burnmp3s at 11:04 AM on September 8, 2011

Make sure to check the fee. Balance transfer fees have been up the last few years--sometimes 4-5% of the amount transferred. Though I did see a 1% fee offer in the mail recently, but that was the first in a long time.
posted by mullacc at 11:06 AM on September 8, 2011

Best answer: Yeah, when my wife and I did the 0% APR balance transfer paydown a few years back, towards the end I had to start to do some fairly simple math to figure out how many months it would take to pay off the transfer fee if we just left it on the interest bearing account. 3-4 months out of an 18 month 0% APR term? Go for it. Out of a 6 month term? Meh, probably not so attractive. But the long term damage to your credit rating is pretty negligible. You probably have a bigger hit if you leave the old accounts around than if you transfer and close out your old line of credit.
posted by Kyol at 3:47 PM on September 8, 2011 [1 favorite]