When it comes to credit scoring, confusion reigns supreme. After all, you're not supposed to know everything, complicated corporate algorithms included.
But it'd be nice to have a general idea as to whether certain actions are perceived as good or bad, right?
Fortunately, companies like FICO drop plenty of hints to inform everyday consumers about how credit scores work, and what will drive them higher or lower.
That brings us to credit card balance transfers, which allow the debt-riddled to move high-APR debt to a credit card with low or promotional APR.
An example would be a cardholder with $3,000 in credit card debt currently paying 22% APR, shifting the debt to a 0% balance transfer credit card.
This would spare the consumer finance charges during the promotional period (typically 12 months), allowing them to pay down their debt much more quickly.
But is such a move perceived as a negative by the almighty credit bureaus? The answer is slightly gray.
When you take on new credit, as you would with a new balance transfer credit card, you're perceived as a greater credit risk, and thus your score could suffer.
However, credit utilization, the amount used versus that available, is also a major credit scoring factor.
New credit would lower your utilization, as you would have a new line of credit available, a plus in the eyes of FICO.
And over time, you'd likely reduce your debt, making you that much more sound in the eyes of those who keep score.
So in the short term, you could see a minor dip, but in the long run, you'd likely benefit, while saving money to boot.