Transferring a credit card balance to another card could help your credit score, but may result in only short-term gains. The FICO credit scoring system rewards people who pay their bills on time while keeping balances low on each credit card account. Keeping balances to around 10 percent of the credit limit on each card is ideal, and some people try to manipulate the system by moving balances around to stay under a certain percentage.
Credit Scores
Credit scores are three-digit numbers ranging from 350 to 850. Scores of 720 or higher lead to the best interest rates on credit cards and loans. Many people with credit scores in the 720-750 range have lots of available credit on their credit cards, but carry tiny balances, if any at all. Credit scores usually drop as credit usage increases, with maxed out cards especially punitive for credit scores. Some people seek to transfer balances on cards that are nearly tapped out even if it means opening new accounts with larger credit lines.
Considerations
Individual situations are different, making it impossible to predict how your credit will be affected by a balance transfer. Timely payments and low balances aren't the only considerations in factoring your score. FICO also considers the length of your credit history, the number of relatively new accounts you have and the type of credit used, such as home equity loans, credit cards and installment loans
New Accounts
Obtaining new credit cards with large credit limits could help with a strategy for transferring balances, but it could also hurt. Your credit score could benefit from having your debt spread around to several different accounts so that not one of them has a balance that exceeds say, 35 percent of the respective credit limits. However, your score could be dinged for applying for new credit and adding new accounts.
Fees
Balance transfers also can be costly because of balance transfer fees and other reasons. Some people eagerly transfer balances onto cards offering no finance charges through a promotional period. But once the promotional period ends, the new interest rate may be exorbitant, with the entire remaining balance subject to retroactive finance charges dating back to the date of the balance transfer.
Alternative
Simply paying down debt may be better in the long run than merely moving balances around. Some people find themselves spending more time on manipulating the system than practicing solid credit fundamentals. Applying for and receiving new accounts, requesting credit limit increases and moving balances around can be a part of a credit improvement strategy. However that plan may be trumped by the credit card user who simply makes small charges on a few cards each month and pays off the balances each time.
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