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Advice on transferring balances on credit cards - The Bills.com Blog
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Advice on transferring balances on credit cards
Question: I have two credit cards. I charge stuff on one credit card to get the rewards. Every other month or so I get "convenience checks" from my other card for a transfer rate of 2.9%. If I transfer from the "rewards" card to the 2.9% card using the checks, does that hurt my credit score?
Answer: Thank you for visiting Bills.com. Generally speaking, a balance transferis not going to kill your credit score, but the amount that your score is affected depends on the other positive and negative items already on your credit report. A balance transfer from a high-interest card to a 2.9% card could save you a lot of money and make paying off your credit card debt easier. You must weigh the cost and benefits before you can decide whether a balance transfer offer is right for you, as there are one time fees associated with the transfer that you are referring to. If you see that you save money even after the fees are factored in, then it might be a good idea to transfer the balance. Also keep in mind that most of the times the interest rates are guaranteed only if you maintain a good payment history, meaning, if for some reason you happen to miss a payment or go over your limit, the interest rates will invariably go up and there will be no benefit for the transfer.
It is important to understand how your credit score is calculated. Your credit rating is calculated based on several variables, including:
1) Payment history, which counts for approximately 35% of your score, is the most heavily weighted factor used in calculating your credit score. Consistently paying your bills on time has a positive influence on your score, while late or missed payments will hurt you in this area. If you have delinquent payments, the older the delinquency the less the negative impact on your score will be. Collection accounts and bankruptcy filings are also taken into consideration when analyzing your payment history.
2) Total debt and total available credit, which counts for about 30%. This section looks at how much debt you
have compared to the total available credit on your accounts. If all of your accounts are maxed out, you will be considered a poor credit risk, because it appears that you are struggling to pay off the debt you have already incurred. If your account balances are relatively low compared to your available credit, this part of the risk analysis should help your overall credit score. The score calculation also looks at these two factors independently. Having too much available credit, whether you have used it or not, could hurt your credit score, as statistical studies have shown that people with excessive amounts of available credit are a higher credit risk. Unfortunately, the bureaus do not define exactly what they consider excessive, so best tip is to use credit conservatively and to keep your debt to credit limit ratio low.
3) Length of positive credit history, which counts for about 15%. The longer you maintain accounts in good standing, the better your score will be. This shows that you are able to make a long-term commitment to a creditor and are consistently responsible about making your payments.
4) Mix of types of credit, which counts for approximately 10%. Having several different types of credit, such a credit cards, consumer loans, and secured debt, will have a positive influence on your credit score. Having too much of one type of credit can have a negative impact.
5) The number of new credit applications you have recently completed, which accounts for about 10% of your score. Applying for too much new credit in a short time period makes indicates that you could be credit risk, as you may be desperately trying to keep your
head above water. The models make an exception for people who are shopping around for a loan, so if you are simply applying to see who can give you the best rate on a new loan, you need not worry too much about damaging your credit score.
While you cannot realistically calculate your own credit score, you can review your credit report for on the five factors I named above to get an idea of whether the accounts listed on your credit report are hurting or helping your credit score. Also, factors such as age, sex, income, and length of employment, have no direct affect on your credit score, and are not considered when the bureaus calculate your score. Keep in mind that for most lenders, your credit score is only one aspect, albeit an important one, of your overall ?credit worthiness,? meaning the creditor?s view of your ability to repay a loan. Your income, for example, is not considered in the calculation of your FICO score, but most lenders will ask you what you earn to analyze your ability to repay the loan. Even if you have an 800 FICO score, if your income is only $10,000/year, a lender will probably not loan you a large sum of money, because despite your past credit habits as measured by your FICO score, the lender can see that you probably cannot afford to repay the loan.
If you would like to learn more about credit reports, credit scoring, and what it means to you, I encourage you to explore the wealth of material offered by Bills.com at http://www.bills.com/credit/
I hope this information helps you Find. Learn. Save.
Best
Bill
www.bills.com
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1. Posted by Dolores on Wednesday 21st November 2007 07:31
Hi, My friend and I went on a cruise together a year ago and I signed up for the cruiseline's credit card and received an extra card for her while we were on the cruise. After I left Hawaii and returned, I cut up my card and she stated that she had also cut up hers. A year later I received a statement that claimed that she ran up to $15,000 of debt and that I was accountable. Now, we want to transfer this credit over to her name, but her credit worthiness is not as good as mine. Where can I turn to have this balance transferred immediately? She wants to transfer it over and I want it off of my credit report. Thanks, Dolores
2. Posted by Nate on Monday 26th November 2007 10:08
As per what you stated in your question, seems like you were the primary applicant and you got an additional user card for your friend. The only way to transfer this amount to your friend's name is if she herself pays it off or does a balance transfer to one of her own credit cards. Once the balance is paid off then you can contact the creditor to close the account. Even closed accounts will remain on your credit report for up to 7 years. You can read more about credit at http://www.bills.com/credit/