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Transferring balances with high annual percentage rates to a credit charge card account with a lower interest (or a 0% interest balance transfer offer) is a great way to pay your charge card debt off more quickly and save a good deal of cash in the process. It’s not as cut and dry as transferring the money from one place to another though, there are some other considerations to work out before you rush into the next balance transfer offer you qualify for: primarily, how does a balance transfer affect your credit report?

Balance Transfers and credit reports – What’s the Connection?

Due to the formula used to calculate ourcredit standing, moving money from one credit charge card account to another can actually cause some negative issues with your credit report that you may not have even realized.

credit standings are calculated with a top-secret formula, but we do know how much weight each component of our credit carries in the calculation:
Payment History – 35%
Outstanding charge card debt – 30%
Established Credit – 15%
New Credit – 10%
Type of Credit – 10%

As you can see, the two biggest factors contributing to your credit report calculation involve how well you make your payments and how much current debt you currently have. When searching for balance transfers and how it will affect your credit standing, first you should realize that most people mistakenly close out the old credit credit card account once the balance has been moved to the new credit card account – this is bad because it lowers the average age of your accounts and this accounts for 15% of your credit report. If most of your credit is recent, and you close your old account(s) as you transfer balances, you’ve suddenly decreased the average length of time you’ve had credit and your credit report will decrease as a result.

In addition, if you close out your old credit credit card account account after transferring the balance, you’ve lowered your current debt to credit ratio, which accounts for a whopping 30% of your credit report. Closing the account gives you less credit available to you, which means you are suddenly using more of your available credit even though you haven’t spent any more money.

It’s also true that opening a credit charge card account account – like the one you want to transfer your higher interest balances to, will result in a lower credit standing. New accounts make up 10% of your FICO credit standing, so it’s possible that opening the new account will take a hit on your account, but since it’s only 10% of your overall score calculation, it shouldn’t be as big of a factor as closing out the older account.

If you transfer a balance to a new credit card account, and leave the old charge card account open – it will actually appear as if you owe less money because you have a higher available credit amount. You may experience a bit of a credit standing increase from this which can counteract the decrease from opening a new account.

Goals for Balance Transfers

Your goal is to have less than 30% of your available credit (all credit card accounts included) utilized. You should always look to transfer balances to charge card accounts that give you the best rates, and leave your old accounts open. In the meantime, don’t charge any more money until your total balance is well below the 30% utilization, and you’ll soon see your credit report affected positively for these responsible financial decisions.

In order to get a better understanding of where you stand with your credit report, don’t forget you’re entitled to a free credit report from each of the three credit reporting agencies annually. With the report, you can see how much credit you’re using, and whether or not looking for a new balance transfer offer might help you raise your score and save a great deal of money on interest.

Now that all this is known you can get your balance transfer credit card at JemCreditCards.com. I would advise Discover Balance Transfer Credit cards.

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