Credit Score and Balances Transfers
If you are in debt and chances are you have some, you might some day turn to debt consolidation to get you out of debt, more specifically credit card debt consolidation. This is one debt is moved to another card with the goal of a lower interest rate and a lower overall monthly payment. The method used to actually move the money is called a balance transfer.
Now does a balance transfer affect your credit score? The answer is no. But debt consolidation will. This is because the credit score calculation looks at your debt to credit ratio. Which is found by dividing how much you owe by the total of your debt. Sounds easy, but truth is that this is done between as a total of all your accounts and an account by account basis. And as you increase your debt to credit ratio regardless if it is on the whole or on one specific account the greater the negative effect it can have on your score.
Now, there is a thing to say about balance transfers if you are still going to go through with it. You should find one that charges the lowest possible fee or even better one that doesn’t charge one at all. This can often be the case with a special offer you might get offering a lower percentage on balance transfers. Furthermore, you need to avoid all debt consolidation pitfalls that are possible. Take the extra money you are saving and snowball it into the debt and you will be out of debt before you know it.
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