Does a balance transfer affect your credit score?

Thinking of moving your debt onto a balance transfer credit card? This guide explains how the process can affect your credit score, the difference between applying for the card and actually transferring a balance, and how to protect your credit rating while managing your debt.

A balance transfer allows you to move existing credit card debt from one credit card to another, often with a lower or 0% interest rate for a promotional period.

Before establishing whether a balance transfer will affect your credit score, it’s important to distinguish between:

Applying for the card

• This is simply submitting an application

• Triggers a hard credit check

• May temporarily affect your credit score

and

Transferring a balance

• This is the actual movement of debt from your old card to the new one

• This may also affect your credit score

Understanding this distinction is crucial because the effect on your credit score is not only about getting the card, but also about how your overall credit score changes once the balance is transferred.

How taking out a balance transfer card affects your credit score

Applying for a balance transfer card can temporarily lower your credit score due to the hard credit check. But if you’re approved:

Your available credit increases, which can reduce your credit utilisation ratio, and subsequently benefit your score.

Your average account age decreases, as opening a new account lowers the average age of your credit accounts. This can have a negative effect on your score because older accounts signal to lenders that you have a long-standing, responsible borrowing history.

These changes are usually minor and temporary, so don’t merit too much focus. They’re also unavoidable if you want to make a balance transfer to clear your debt.

How transferring a balance affects your credit score

While the application affects your score briefly, the actual balance transfer can have additional implications. These include:

Credit utilisation ratio

Moving a large debt onto a new card changes the proportion of available credit you’re using. If the new card’s credit limit is high, your utilisation may decrease, which can boost your score. Conversely, transferring a large balance to a card with a lower limit can increase utilisation, negatively affecting your score.

Your credit utilisation will also increase if you close your old credit card. However, you might wish to do this to avoid the temptation of adding to your debt.

Timing of the transfer

Making multiple transfers in a short period or transferring large balances right before applying for other credit can signal risk to lenders.

Payment history on the new card

Once the balance is transferred, timely payments on the new card are critical. Any late payments on the transferred balance will directly harm your credit score.

What steps can I take to protect my credit score when making a balance transfer?

Taking a few careful steps can minimise score impacts from both the application and the actual balance transfer.

Check your credit report first

Review your credit history to ensure there are no errors and that you’re in a strong position for approval for a new credit card. There may be small things like registering to vote????

Choose the right card

Use a credit card eligibility checker to see which cards you’re most likely to be accepted for. Try to select a card with a high enough limit to accommodate your transfer without maxing out the card, helping to keep your credit utilisation low.

Transfer strategically

Avoid transferring more than you can pay off during the promotional or introductory period. Keep track of multiple transfers so your utilisation across cards remains manageable.

Maintain other credit accounts

Keep your older cards open to preserve your average account age and total available credit. But be wary of the temptation to overspend and put yourself in more debt.

Set up automatic payments

Timely repayments on your new card are essential. Any missed payment on a transferred balance will negatively impact your credit score.

Avoid new credit applications

Refrain from applying for additional credit until your balances are under control. Each new application is a hard inquiry and can lower your score.

Is there an ideal time to apply for and transfer a balance?

By planning both the card application and the actual balance transfer carefully, you can protect your credit score while reducing debt.

Good times:

• When your credit score is strong, increasing approval chances.

• After reducing your current debt to lower your credit utilisation ratio.

• When interest rates on existing cards are high, maximising the benefit of the transfer.

Ill-timed applications or transfers:

• Right before applying for a mortgage or loan. Hard searches or a higher reported balance may affect your eligibility.

• After missing payments. The chance of approval is smaller and interest rates are likely to be higher.

• When credit utilisation is very high. Transferring large balances onto a low-limit card can worsen utilisation and lower your credit score.

Other useful guides

We have plenty of other guides about managing balance transfers and credit cards in general. These include:

• How to transfer a credit card balance

• What is a balance transfer?

• How to cancel a credit card

Compare balance transfer credit cards with MoneySuperMarket

MoneySuperMarket makes it quick and easy to compare balance transfer credit cards from leading providers.

You can see 0% interest deals and promotional periods at a glance, check any balance transfer fees before applying, and compare credit limits, rewards, and perks.

We’ll also run a soft search to show your eligibility, so you can find the right card without affecting your credit score.

Use our comparison tool to discover the deal that best suits your financial situation and helps you manage your debt more effectively.

Moneysupermarket is a credit broker – this means we’ll show you products offered by lenders. You must be 18 or over and a UK resident. We never take a fee from customers for this broking service. Instead we are usually paid a fee by the lenders – though the size of that payment doesn’t affect how we show products to customers.