Can Balance Transfer Cards Help Improve Your Credit Score?

If you’ve been trying to get out of debt and improve your financial situation, chances are you’ve looked into a balance transfer credit card to help you do so. While this may seem like the answer to many of your problems, can it also help you improve your credit score? Let’s take a look.

Too Good To Be True?

While a balance transfer credit card can help you get out of debt, it requires a lot of work on your part. An article written for equifax.com explains, “In some cases, a balance transfer could positively impact your credit scores by helping you pay off your debts faster than you would be able to otherwise. However, this requires you to diligently work toward paying down your debts after the balance transfer has taken place. It’s also important to remember that you don’t have just one credit score. Consumer reporting agencies use different scoring models, so your credit scores may vary depending on the source.”

The key point is that you have to actively work on paying down your debt in conjunction with transferring your balance. The card alone can’t solve all of your financial problems.

Improving Your Credit Score

While a card alone can’t fix your credit score, there are things you can do in conjunction with a balance transfer card to help your financial situation.

Keep Existing Lines of Credit

Don’t worry about closing your other credit card(s) even if you end up transferring your balance. Both the mix of credit you have and the age of your accounts factor into your credit score calculations. Keep both open to avoid negatively impacting your credit score.

Choose One Card

Applying for multiple credit cards at a time can do serious damage to your credit score. For this reason, it’s important to do extensive research in order to find one card that meets your desired criteria. When you find it, apply only for that card. The above mentioned article goes on to say, “When you apply for a new credit card, the issuer performs a hard inquiry into your credit history. A hard inquiry can temporarily decrease your credit scores. However, opening a new card can also improve your credit utilization rate, which is the amount of credit you use compared to the total credit available to you. Applying for just one new card with a low introductory interest rate may reduce your credit utilization rate, which in turn may help counteract the negative impact that opening a new credit card can have on your credit scores.”

Reduce Debt

The benefit to opening a balance transfer card is all of the advantages you get that will help you pay off your debt faster. This, in turn, will help improve your credit score. Low or no interest for 6-18 months, a lower interest rate, no balance transfer fees and other benefits like rewards points or cash back incentives are just a few of the common balance transfer perks. If you’re going to take advantage of them, you need to make sure you’re paying off your credit card balance within the appointed time period. Failure to do so means you won’t earn any of the perks. This is another reason why doing a lot of research is so important. When you know how much time you have to pay your balance in full, you can decide whether or not it’s realistic for you. If it’s not, you should probably keep looking until you find credit card requirements you feel you can comfortably meet.

Slow Down

Lastly, you can help improve your credit score by slowing down on the excessive spending. Some people are tempted to max out their credit card again after they’ve transferred their previous balance to a new card. In order to salvage your financial reputation, it’s important that you get your spending under control. If you plan to use your credit card, try to spend only what you know you’ll be able to pay off each month. Building good credit takes time. Make sure you’re committed for the long haul.

Balance transfer credit cards can help improve your credit score. However, they’re just one of many ways to do so. Use them in conjunction with a lot of hard work in order to better your credit score and work your way out of debt.