Balance Transfer Checks & Effect on Score

[Anonymous]

My question is about credit card balances and my FICO score -  

I currently have 3 credit cards - 2 AMEXes and a Visa. The total credit available on them is $69K. I've never carried a balance on any of them for any length of time at all. I charge only $4K per month on all of the credit cards, combined - I have a lot of unused credit card availability.

I'm considering using a "balance transfer" check that Visa sent me to help provide money for a down payment on a house this fall. I'm trying to grab the first-time homebuyer credit. My question is how a balance transfer check would effect my credit score.

The credit limit on the Visa is $30K, and I'd probably write the check for around $20K (although I could probably get by with less). The balance transfer check has a promotional rate of 7.2% (that includes all of the fees) until November 2010.

The rate seems decent, so the main concern I have is the effect on my FICO. My score is currently 772. I wouldn't want the transaction to cost me interest rate percentage points on a mortgage loan. Any thoughts or insight would be greatly appreciated. Many thanks.

Message Edited by GrandInquisitor on 06-20-2009 09:38 PM

[Anonymous]

I think more than the score points you will run into issues using the transfer check as deposit.  It may also trigger a review of accounts and reducing credit limits, in addition it will be a high utilization on that card as well as on your limits overall being fairly high.

But as I said first and foremost.  You generally need to show proof of where the money for deposit is coming from and if it is going to be "borrowed" against a credit card that may cause issues for some lenders.

[RobertEG]

Convenience checks are not normally a pure BT.  You are not transferring the balnce from one CC to another.  Thus, it will increase your % util of revolving credit.

You have to consider both FICO and financial impacts.

On the financial side, the the promotional interest rate is normally not the only fee.  Most conveniient checks carry a 3% up- front charge for the transaction.  Did their offer incldue this fee? If so, then a 20K check will result in an instant $600 fee charged to your account balance.

On the FICO side, it will put your VISA at 20K plus $600 on balance owed side, with a resulting %util of well over 60% on that card.  FICO scores % util on each card.  It will also increase your overall revolving %util.  I see no way that this will not negatively affect your FICO score.

[Anonymous]

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@Anonymous wrote:

My question is about credit card balances and my FICO score -  

I currently have 3 credit cards - 2 AMEXes and a Visa. The total credit available on them is $69K. I've never carried a balance on any of them for any length of time at all. I charge only $4K per month on all of the credit cards, combined - I have a lot of unused credit card availability.

I'm considering using a "balance transfer" check that Visa sent me to help provide money for a down payment on a house this fall. I'm trying to grab the first-time homebuyer credit. My question is how a balance transfer check would effect my credit score.

The credit limit on the Visa is $30K, and I'd probably write the check for around $20K (although I could probably get by with less). The balance transfer check has a promotional rate of 7.2% (that includes all of the fees) until November 2010.

The rate seems decent, so the main concern I have is the effect on my FICO. My score is currently 772. I wouldn't want the transaction to cost me interest rate percentage points on a mortgage loan. Any thoughts or insight would be greatly appreciated. Many thanks.

Message Edited by GrandInquisitor on 06-20-2009 09:38 PM

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As others mentioned, thre are several issues in your question:

1.  The effect on your FICO

2.  The effecton your DTI (Debt to Income ratios) which are very important in mortgages.

3.  The fact that FHA, VA, USDA and most any loan associated with Fannie or Freddie specifically prohibit you from borrowing your down payment.  It can be a gift under certain circumstances, but otherwise is supposed to come from your own cash reserves (savings) which is an indicator of your financial ability to handle the purchase and loan.