Transferring balances might lower credit scores

Dear EPE,

Transferring your credit card balances from one credit card to another might have a temporary effect on your credit scores because of the sudden instability it creates in the history.

Any significant change, such as opening or closing an account, or sometimes even paying down your balances, can cause a temporary dip in your score. In addition to stability, the details of your account are also reflected in the score.

For example, if you were to close the cards you transferred the balances from, it could make your balances greater compared to the limits you now have available. An increase in your balance-to-limit ratio has proven to indicate an increase in risk, and so negatively affects credit scores.

When you transfer credit card balances – without closing any credit card accounts – you are not increasing your debt-to-limit ratio, so there shouldn’t be any negative impact for that reason.

In fact, opening a new account should increase your total credit limit. Over time that could result in a positive change in your credit scores.

Transferring your balances so that you can get a lower interest rate and better manage the debts may help you reduce the balances or even pay off the debt faster. Lower balances often help you get even better credit scores than you had before.

Thanks for asking.