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How Does Balance Transfer Affect Your Credit Score

Banks or credit card issuers provide the consumers with the balance transfer facility that allows them to transfer their debts to another account. By availing this feature, consumers can consolidate the overdue balance on their credit cards to a single loan account or transfer balances from one loan account to another to avail a lower rate of interest. Balance transfers can have positive or negative impact on your credit score depending on how you handle your debt transfer and payment. So, before opting for a balance transfer, it is important to get your free credit reportand check the impact that your existing loans and card accounts have on your report. After transferring the balance, you may see the following positive and negative impacts on your credit score.

Benefits of Balance Transfer on Credit Score

Related Read: How Much Time is Needed to Improve One’s CIBIL Score?

Drawbacks of Balance Transfer on Credit Score

Based on the points discussed above, you should analyse the most suitable path for you while opting for a balance transfer. A credit account with either an introductory offer of zero interest charges or at least with a lower interest rate must be preferred to avoid paying high additional charges applicable to the existing debt. Similarly, you must also look out for one-time charges that banks may apply on balance transfers. For example, in case of credit card balance transfers, you should choose a card with the least possible interest on balance transfer and a low processing fee.

It is also advisable to keep the older credit card accounts active even after you decide on opening a new account for the transfer so that your length of credit history is not affected. Apart from this, you should also make an active effort to form a strict yet practical budget to reduce your debt as quickly as possible.

The key to using the facility of balance transfer effectively is to make calculated and responsible choices. To make the best of the overdue amount transfer, you must select the account to which you would transfer your balance after careful analysis and manage your available funds and credit in a way that helps you to repay your debt efficiently and on time.

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