topic How does balance transfer affect credit score? in Understanding FICO® Scoring

How does balance transfer affect credit score?

Anonymous — Sat, 07 May 2016 20:51:26 GMT

Does a balance transfer from one card to another vs paying balance differ, if at all? This is assuming that the end result of balance to credit limit will be the same. I am curious if the act of transferring is reported or has any impact. Forget about fees, still making minimum payments, etc.

For example,

Card A starts with 10000 on 25000 credit limit

Card B starts with 0 on 25000 credit limit

Option 1: pay Card A 5000 and charge 5000 new charges to Card B

Option 2: pay Card A 5000, transfer 5000 from Card A to Card B, and charge 5000 in new charges on Card A

In both cases,

Card A ends with 5000 on 25000 credit limit

Card B ends with 5000 on 25000 credit limit

Re: How does balance transfer affect credit score?

Anonymous — Sat, 07 May 2016 21:43:28 GMT

Is not reported as a transfer.

Only affect is utilization and if Card A or B have an APR promotion. If card A has 0% APR promotion for balance transfer and Card B does not. It may be worth putting whole balance on Card A and taking a hit for utilization while paying it down before Promotion ends.

Re: How does balance transfer affect credit score?

SouthJamaica — Sat, 07 May 2016 23:14:22 GMT

@Anonymous wrote:
Does a balance transfer from one card to another vs paying balance differ, if at all? This is assuming that the end result of balance to credit limit will be the same. I am curious if the act of transferring is reported or has any impact. Forget about fees, still making minimum payments, etc.

For example,
Card A starts with 10000 on 25000 credit limit
Card B starts with 0 on 25000 credit limit

Option 1: pay Card A 5000 and charge 5000 new charges to Card B
Option 2: pay Card A 5000, transfer 5000 from Card A to Card B, and charge 5000 in new charges on Card A

In both cases,
Card A ends with 5000 on 25000 credit limit
Card B ends with 5000 on 25000 credit limit

Balance transfers don't show up on a credit report.

Re: How does balance transfer affect credit score?

RonM21 — Sun, 08 May 2016 10:35:39 GMT

No they aren't reported in a negative way, and only the utilization change, if any, will effect the score.

However, when lenders pull your credit, it appears that if you've had too many transfers it's possible that it can be held against you by the term "too much pyramiding debt." At least this is what I've seen form several posts on here. I could be wrong.

Re: How does balance transfer affect credit score?

woozy — Sun, 08 May 2016 10:46:19 GMT

Fair warning to anyone looking for a free" lunch: I transferred a balance to a Chase zero interest card. By giving myself a 90% utilization on that one card, my score dropped 60 points! (25% utilization overall)

Re: How does balance transfer affect credit score?

SouthJamaica — Sun, 08 May 2016 12:53:37 GMT

@woozy wrote:
Fair warning to anyone looking for a free" lunch: I transferred a balance to a Chase zero interest card. By giving myself a 90% utilization on that one card, my score dropped 60 points! (25% utilization overall)

That's why I'm always asking people what their priorities are.

Saving money on interest and raising your FICO score have nothing to do with each other; FICO doesn't give you points for how low your interest rate is.

Re: How does balance transfer affect credit score?

Thomas_Thumb — Sun, 08 May 2016 15:21:20 GMT

@woozy wrote:
Fair warning to anyone looking for a free" lunch: I transferred a balance to a Chase zero interest card. By giving myself a 90% utilization on that one card, my score dropped 60 points! (25% utilization overall)

@woozy wrote:

US Bank, $12,000 limit, $40.00 balance
Cap1, $8000 limit, $3000 balance
New Chase no interest card, $3000 limit, $2800. balance, transferred from the US Bank.

That's it.

Card maxout - particularly on a new card has a significant negative impact on score. Not to say other factors couldn't be in-play as well.

If you are willing, pay $150 of the balance to bring the card's utilization to just under 89% and report back on resuls. I think that may allow you to gain back quite a few points. You will still be above 50% and 70% which are widely considered high utilization thresholds.

Re: How does balance transfer affect credit score?

Imperfectfuture — Mon, 09 May 2016 16:19:13 GMT

@RM21 wrote:
No they aren't reported in a negative way, and only the utilization change, if any, will effect the score.

However, when lenders pull your credit, it appears that if you've had too many transfers it's possible that it can be held against you by the term "too much pyramiding debt." At least this is what I've seen form several posts on here. I could be wrong.

Um, when they pull credit, how do they know you are doing balance transfers? It's not like it's reported.

Re: How does balance transfer affect credit score?

Anonymous — Thu, 12 May 2016 18:51:08 GMT

@Anonymous wrote:
Is not reported as a transfer.

Only affect is utilization and if Card A or B have an APR promotion. If card A has 0% APR promotion for balance transfer and Card B does not. It may be worth putting whole balance on Card A and taking a hit for utilization while paying it down before Promotion ends.

I was worried about doing a balance transfer because it would put my one card at 60% utilization. But since I already purchased my house and don't plan on apping for anything for a while, what does it matter? I'd rather take advantage of the 0% interest and let my scores bounce back. I guess being on the forums too much have me over paranoid. I feel like I'm starting to put myself in more of a bind trying to maximize my score.

Re: How does balance transfer affect credit score?

Anonymous — Fri, 13 May 2016 17:56:06 GMT

I've done quite a few bal tansfers over the years and I've seen exactly what happens each time. It's totally fine. You just have to give the whole transacation a few weeks to "Settle". In your scenario, where you're well under the 50% threshold, take the whole $10k and move it onto Card B, then pay it off as fast as you can. Now, the other trick is to not use Card A at all.....not even for a $50 dinner or whatever. You want to be under the 50% threshold, BUT you also want as many accounts with a $0.00 balance as possible - it's called "Too many accounts with balances", to be precise. Initially, when the transfer happens, Card B may show a balance and drop your score until the corresponding $0.00 shows up for Card A, then it'll go back up. It may take 3+ wks to balance back out, but it will eventually balance out again. Go for it !!