When it comes to overdue bills on credit cards, a balance transfer is one of the most preferred and cost-effective ways to manage the debt. Under this, you pay off the balances on your existing credit card by transferring them to another credit card account. A lot of users ask how a balance transfer affects their credit score- whether it hurts their score or improves it. Let’s find out.
A balance transfer helps you pay off your debts faster and, if you are carrying debts on multiple credit cards, consolidating them into a single card will surely reduce the risk of missed payments, which would negatively impact your score later. So, in this way, it helps you maintain a good score, if not improve it. However, balance transfers can hurt your credit score by increasing your single-card utilization, lowering your length of credit history and adding a hard inquiry to your credit report (if you are applying for a new card to transfer the balance).
Suggested Read: Pros and Cons of Owning Multiple Credit Cards
Before we dig deeper to understand the impact of credit card balance transfer on your credit score, let us first understand the process of balance transfer in detail.