Can a Balance Transfer Card Help You Repair Your Credit?
When you’re struggling to stay on top of high-interest credit card debt, a balance transfer offer can look like quite an attractive deal. However, before you jump on a promotion, understanding that the manner in which you handle the transfer can improve or damage your credit score is critical.
There are few factors that determine how that happens, and over the course of this blog post, we’ll discuss three of them.
If you’re considering getting a balance transfer credit card, know that it can either be a good thing or a bad thing for your credit. The following are some important things to consider.
Whenever you apply for a new credit card, the credit card company will perform a hard credit check on you. And each time it happens, it could take some points from your credit score. The more the number of times you apply, the higher the number of inquiries. This can have a compounding effect.
Consequently, it’s vital to know if you have a credit score good enough to get approval for a balance transfer credit card. Applying and getting rejected multiple times can be more than just frustrating; it could actually damage your credit score.
The amount you owe is the second-most significant factor in your FICO credit score, with your credit utilization being an important part of that calculation. To calculate your credit utilization, you need to divide your balance by your credit limit. Generally, it’s recommended that you keep your credit utilization below 30%. However, the lower it is, the better.
Therefore, if your new credit card’s limit is lower than that of your old one, it could spike your utilization rate and damage your credit score. On the flip side, if the credit limit on your new card is higher than the old one, the transfer could be good for your credit score.
Pay Off the New Card or Keep the Debt?
If you pay off the debt on your new card, it could increase your credit score as it slashes your debt burden. In fact, being proactive in paying off your debt can prevent a high utilization rate from damaging your credit score for too long.
But, if you keep the debt on the card with no payoff strategy, it could continue to hurt your credit score, especially if your credit utilization is high. So, avoid using a balance transfer credit card if you don’t have a payoff strategy in place.
If you’re looking for quick credit repair services, get in touch with us at Oak Credit Repair. A leading Michigan-based credit score specialist, we cater to clients all over the United States.