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Does a balance transfer affect your credit score?

Any change to your financial situation can impact your credit score, including a balance transfer.

If a balance transfer helps you tackle your debts and pay them off sooner, it will improve your credit score over the long term. In the short term, however, applying for a balance transfer credit card could potentially lower your credit score.

How transferring a balance impacts your credit score

When you apply for a new balance transfer credit card, the lender will check your credit report as part of the approval process. This hard credit check will leave a visible footprint on your credit file, which can cause a temporary drop in your credit score. 

But as you’re transferring the balance from one credit card to another – possibly with 0%, or at least a reduced interest rate – you may find your credit score improves over time. This is because you’re likely to be able to manage and pay off the balance quicker – assuming you don’t spend money on the card and add to your existing debt.

Explore: How to use a balance transfer credit card

How to reduce the chances of any negative impact

1. Don't apply for multiple balance transfer credit cards at once

Applying for several credit cards at once can have a negative impact on your credit score as it indicates to lenders you may be struggling to manage your money. 

Rather than applying for multiple cards, just to see what you’ll be approved for – find the right type of credit card for you and apply for that.

If you’re not approved for the card you want, it could be worth checking your credit report to make sure everything’s accurate before applying for another credit card. In the UK, there are 3 main credit reference agencies:

  • Experian

  • Equifax

  • TransUnion

There are also things you can do to improve your credit score to increase your chance of being approved for another credit card.

Explore: 5 reasons to care about your credit score

2. Don't close lots of credit cards after completing a balance transfer

One of the factors that impacts your credit score is how long you’ve held certain financial products. If you close several credit cards that you’ve had for a longer amount of time, this can have a short-term impact on your credit score. 

Managing multiple cards with varying interest rates can be stressful, so don’t let this put you off closing any credit cards you no longer need. Your score should rebuild over time, but if you really want to minimise any impact you could consider just closing some of your credit cards rather than all of them.

3. Repay the credit card debt

The big advantage of a balance transfer is a potential interest-free period when you can pay off (or reduce) your debt. If you don’t repay the debt, or spend more and end up in further debt – there may be a negative impact on your credit score.

To help you stay motivated, it can be a good idea to plan out your repayments over the course of the reduced-interest period. For example, if you have a debt of £5,000 and an interest-free period of 18 months, you could set yourself a goal of repaying £280 every month. This means your debt will be clear by the time the interest-free period is over.